Fed's decision to lower interest rates affects Athens

by Natalie Hines
For The Post

Members of the Athens community have differing opinions on whether the Federal Reserve made the best decision Oct. 2 in lowering interest rates.

The Fed lowered the discount rate in an attempt to increase corporate borrowing. This borrowing encourages new projects, which later will help the economy by providing jobs.

Jeff Swaim, supervisor of customer service at Hocking Valley Bank, said the new circulated money has a ripple effect on the economy.

"(It) comes down through the Federal Reserve trying to save funds. The interest paid goes down," he said.

The lowered interest rates also make buying a car or house more affordable. Fifteen-year mortgages are the lowest since 1962.

OU finance instructor Scott Wright said the decision has some positive affects.

"I love lowered interest rates because it is cheaper to borrow money," he said. "My only question is – did they do it quick enough?"

But Josh Woodby, OU senior and chairman of the board of OU's Portfolio Management Group, said this may have a negative affect on the economy in the long run by causing inflation.

"It seems as if the Fed is relying on it as though it were a cure-all for the economic situation," he said. "This action may help to bring some confidence back to consumers, having some potentially positive effects. However, when it is all over with, we, the economy, will be producing at pre-recession levels, except now we are paying more. We have gained essentially no ground."

Woodby said this would affect Athens directly in the short-run. It will take a while for people to invest in businesses and he said he doubts that will happen, because people are not buying right now.

But indirectly, Athens will be affected because parents' incomes will increase and incomes of students will increase, too. Students will spend more, helping the economy, Woodby said.

"This continued monetary policy manipulation has become ineffective in the current economic situation," he said. "Instead, there should be adjustments in fiscal policy that promote corporate growth."