Newspaper article The Christian Science Monitor

Falling Interest Rates Pour Cash into Economy

Newspaper article The Christian Science Monitor

Falling Interest Rates Pour Cash into Economy

Article excerpt

If the rich get richer, then what do borrowers get?

In 1998, it seems, millions of debtors will get a break.

Bond traders have charged into the new year bearing a big gift:They pushed long-term interest rates to their lowest level in nearly 30 years. And short-term rates may follow. "Declining rates most help people in their prime borrowing years," says James Chessen, chief economist at the American Bankers Association in Washington. A boost for economic growth But falling rates help virtually everyone by sparking broad economic growth. Lower rates have already triggered a wave of mortgage refinancing, which frees up billions of dollars for consumer purchases. The last refinancing binge, in 1992-93, unleashed $40 billion and helped end the last recession, Mr. Chessen says. Short-term rates, which shape many consumer loans, have not fallen nearly as much. But bond traders apparently see them dropping, too. Bonds with five-year maturities last week traded with yields below the 5. …

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