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Borrowers love low interest rates and savers love higher rates. So many people who responsibly saved money remember fondly those days when savings accounts and certificates yielded 5% or better. The interest rate environment changed a great deal since those days. The Federal Reserve Bank managed short term rates down to zero (they called it ZIRP – zero interest rate policy) in their attempt to manage the economy following the Great Recession of 2008.

Savers wondered when rates would ever go up so a decent yield could again be obtained on savings accounts, share certificates and IRAs. A year ago, financial experts projected that the Fed would raise rates four times in 2016 and the Fed did indeed tease us with a 0.25% increase in December. No rate increases since then though, and it appears that if anything, the next rate movement may be downward.

For savers, it could be worse. At least here in the U.S. we have positive rates. Currently 40% of the world’s governmental debt is being issued at negative interest rates. This would have been considered unthinkable in the past. These incredibly low rates are happening because central banks throughout the world are monetizing debt (i.e. flooding the markets with dollars, euros, yen, etc.). As bad as the U.S. national debt is (well over $19 trillion; or $161,000 per taxpayer), most of the rest of world is in worse shape. As various economic hiccups occur, like British voters deciding to leave the European Union last week, the world’s money moves to a safe haven – the U.S. dollar.   Since the rate of interest is essentially the price of money, the law of supply and demand dictates that the more attractive the U.S. dollar is, the lower interest rates will decrease.

This extremely low interest rate environment is clearly not sustainable in the long run. One of these days, rates will go up. But for the short term, through the end of the year and into next year, expect rates to remain low. This may not be welcome news to those of us who are net savers, but this rate environment presents an excellent opportunity to borrow. Day Air Credit Union stands ready to discuss any and all of your borrowing needs, whether it be to purchase a vehicle, to purchase a house, to fund a small business, to do home repairs, to finance a vacation, to refinance high rate credit card debt, or for any other productive purpose.   Contact Day Air for assistance with all your financial needs.