The Fed And You

Ben Bernanke, Chairman of the Federal Reserve, plans to hold a meeting this Tuesday to take a look at the nation's interest rates. Stephanie AuWerter, Editor of SmartMoney.com, discusses the Federal Reserve and what may happen to rates and to the stock market.

"This is [probably] the most important meeting for Ben Bernanke to date," says AuWerter. " It's widely expected that they're going to cut rates - most folks think that it's going to be by 25 basis points."

Investors, however, are going to be looking at what Bernanke has to say as well. They're interested in the economy. "Bernanke has been clear that he doesn't want to simply bail out those companies that are struggling with the current credit situation," says AuWerter. "This is going to be a very interesting week for Wall Street."

AuWerter thinks it will be intersting to see how investors react to Bernanke's statement. "If we do indeed get a 25 basis point cut, investors may be disappointed," she says. However, AuWerter emphasizes that in general, the market is doing okay. "Long term investors should look at their portfolio, look at their investing environment, but they don't want to get too bogged down by short-term situations."

Even if you're an average, everyday consumer, a small rate cut isn't going to have a huge impact on you. "You will see loans adjust a little bit, the rate on your credit cards could go down a little bit, adjustable-rate mortgages could go down a little bit," says AuWerter. It won't be a huge difference, though.

AuWerter advises keeping a closer eye on the employment figures. "A lot of the companies have said that they're going to have layoffs in light of this current mortgage meltdown," says AuWerter. Watch out for the weakening of the dollar and higher oil and gold prices. This may have more of an impact on consumers than the minor changes in interest rates.

In fact, oil prices could be a big concern. The weather is slowly turning colder, and people are looking to buy oil to heat their homes this winter. AuWerter says, however, that out of 107 million homes, only about 8 million use oil to heat them. "My advice for homeowners who do use oil is shop around," says AuWerter. "Another option is to look at co-ops, where people get together, they buy in bulk and they do it at a discount."

For more information on this, as well as more personal financial advice, click here.
By Erin Petrun