The Federal Reserve continued its assault on savers last week, keeping its target for the federal funds rate at zero to 0.25 percent and reiterating its intention to maintain exceptionally low levels for the rate at least through late 2014.
Here's a summary of the Fed's observations.
- The economy has been expanding moderately.
- Labor market conditions have improved.
- Unemployment has declined, yet it remains elevated.
- Household spending and business investment have continued to advance.
- The housing sector is still depressed.
- Inflation has picked up somewhat, mainly due to higher crude oil and gasoline prices.
- Longer-term inflation expectations have stayed stable.
- Economic growth is expected to remain moderate then pick up gradually.
That all sounds good, except for the part where savers are again hit hard by the Fed's easy-money stance.
Add the effect of inflation, and the return on savings continues to be nil or even negative. And, thanks to the Fed, there's no end in sight. Consider for a moment that late 2014 is a time horizon of another two and a half years.
Low rates may indeed goose the economy and encourage people to buy homes and cars, but saving matters, too -- especially for people trying to make ends meet on a fixed income or plan ahead for financial emergencies.
The National Foundation for Credit Counseling, or NFCC, the largest national nonprofit credit counseling organization in the U.S., recently noted in a statement that consumers can't know where they're going financially unless they know where they are currently -- and that includes knowing how to save.
The organization advises consumers to "plug the leaks" in the household budget by tracking everyone's spending for 30 days and looking for expenses that can be reasonably reduced.
"With a little effort," the NFCC said, "this (effort) could net an extra $100 per month, enough to begin a rainy-day savings account."
That's excellent advice, though saving would so much sweeter if the rate of return were something more than zero.
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