How does overnight lending rate make it to consumer?

[farmerjohn1324]

So the Fed Funds Rate directly affects the rate that large commercial banks borrow at.

What is the main way that it goes from there to the consumer?

Business loans? Mortgages? Refinancing of previous loans?

How long would it take for these to take effect?

 

[qwerty11]

companies can lend easier so jobs are saved?

 

[farmerjohn1324]

companies can lend easier so jobs are saved?

Borrow easier?

 

[qwerty11]

isn't lend the same as borrow?

 

[farmerjohn1324]

isn't lend the same as borrow?

I believe it's the opposite.

 

[MattZ]

Business loans? Mortgages? Refinancing of previous loans?

In practice, mortgages and loans dont fall at the same rate as Fed rate is lowered.
This is because it becomes much riskier to lend money when the unemployment rate is high, businesses may fail, etc.

In 2008 when they banks were bailed, they did not go on a lending spree.

 

[Amun Ra]

isn't lend the same as borrow?

As much as buy is the same as sell.

 

[farmerjohn1324]

In practice, mortgages and loans dont fall at the same rate as Fed rate is lowered.
This is because it becomes much riskier to lend money when the unemployment rate is high, businesses may fail, etc.

In 2008 when they banks were bailed, they did not go on a lending spree.

In sheer volume of dollars spent...

Is mortgages the primary method? Business loans?

 

[tiddlywinks]

So the Fed Funds Rate directly affects the rate that large commercial banks borrow at.

What is the main way that it goes from there to the consumer?

Business loans? Mortgages? Refinancing of previous loans?

How long would it take for these to take effect?

Your thinking that short-term and ultra-short term lending makes it directly to the consumer is misguided.

Here is a right now article on Mortgage Servicers...
https://www.cnbc.com/2020/03/23/cor...inquencies-could-bankrupt-payment-system.html

Another simple example to ponder...
A company(or division) with a 2 million dollar payroll, and 5 million invoiced for 10 days from now, and 5 million in treasurys due in 3 months. All necessary fixed costs like rent, electric, cells, insurance, taxes, etc, are covered with cash on hand.

 

[qwerty11]

As much as buy is the same as sell.

OK, English is not my native tongue....

(in my language lending can both mean getting the loan or providing the loan (i.e. lending from, lending to))