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How Lower Interest Rates Hit Consumers In The Wallet


Economic Trends

HOW LOWER INTEREST RATES HIT CONSUMERS IN THE WALLET

Although the recent decline in interest rates may be providing consumers with capital gains on their stock holdings, it isn't bolstering their incomes. Economists at Goldman, Sachs & Co. estimate that each percentage-point drop in rates reduces household interest costs by about $7 billion a year, mainly via adjustable-rate mortgages and home-equity loans. But it also reduces interest income from money-market deposit accounts and other interest-sensitive assets by about $15 billion, so the net income effect is clearly negative.GENE KORETZ ALBERTO MENA/BW


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