So what will the Fed do tomorrow????

[IronWing]

I think Fed will be grossly irresponsible and pander to the market by cutting the rate by .25%. The market will respond by shooting up 240 points. Unless of course the spoiled, bailed out, little snots on Wall St. whine that .25% isn't enough in which case the market will tank on the order of 294 points. Just a guess.

 

[watdahel]

Can someone explain to me what the points mean and what discount rates mean and how it affects me?

 

[IronWing]

Originally posted by: erwin1978
Can someone explain to me what the points mean and what discount rates mean and how it affects me?

Here's a start:
http://en.wikipedia.org/wiki/Federal_funds_rate

Basically: When the rate goes up, borrowing gets more expensive and the money supply contracts. When the rate goes down, the borrowing gets cheaper and the money supply expands. What it means to an individual depends on their financial standing. If you are a saver with a traditional savings account, rate cuts hurt because you earn less interest and the value of your money goes down (inflation). If you are a borrower with adjustable rates or borrowing new money, rate cuts help because your interest payments will be lower and inflation will make the money cheaper when time comes to pay it back.

The stock markets like lower rates for two reasons: 1) It makes corporate borrowing cheaper so companies are more likely to expand through borrowing and 2) It makes stock returns more attractive relative to bank deposits. If rates drop, investors seeking higher returns will move money from banks to the stock markets.