Fed slashes rates again - but will it help?

12.17.08
By Nicholas Storie

When the Federal Reserve announced on Tuesday that it would be slashing the federal funds rate to .25 percent, it may have been trying to send a message that it is prepared to go to great lengths to boost the economy.

But how will the move benefit the average consumer? Some financial experts point out that previous rate cuts did very little to thaw credit. Plus, the real problem does not seem to be the cost of credit - but a number of economic issues that have led to credit being more or less unavailable.

However, even if the cut itself is not a magic bullet, the Fed announced other measures that may result in some benefits for consumers.

For example, its plan to purchase mortgage, credit card and student loan debt could have a direct impact on how expensive it is for people to pay back this debt, Dean Baker of the Center for Economic and Policy Research told MarketWatch.

"In effect, the Fed is stepping in as a very big actor with the explicit goal of driving down these interest rates," he explained. "If it is prepared to buy enough debt, it can drive these rates down."

So, the answer to whether people will actually see the results of the Fed's actions seem to echo other recent questions about the country's financial future - wait and see.

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Ben Benanke has said the Fed will take action to help the economy recover