Interest rates decline, stocks increase
The Associated Press had an interesting article about how the credit industry has been affected by the Federal Reserve’s recent decision to lower the federal funds rate to 4.75 percent. The federal funds rate is essentially the interest rate banks charge each other for loaning money to each other through the Federal Reserve. The new rate is a welcome relief after a steady climb over the last year, and it no doubt has financial institutions and lenders clicking their heels in delight.
According to the Associated Press, the lower federal funds rate is expected to be “reflected immediately” when commercial banks pass their savings on to consumers through lower prime lending rates.
The credit card companies have enjoyed seeing their stocks climb, largely as a result of the Fed’s decision.
American Express Co. saw a 5.1-percent climb.
Mastercard Inc. saw a 6.7-percent increase.
Capital One saw a 5.3-percent increase.
Discover Financial Services saw a 7-percent climb.
Of even greater interest is the fact that American Express is exiting the international banking business to focus on its core product, credit cards. The times, they are a-changin’. It will be interesting to see how the credit card companies will join in the interest rate free-fall, if they do so at all.
September 19th, 2007 at 9:46 am
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