Business Commons^™

How Are Interest Rates Affecting Household Consumption And Savings?, Lacy Christensen

All Graduate Plan B and other Reports, Spring 1920 to Spring 2023

This paper explores the optimal interest rates that could potentially maximize overall consumption and savings. I attempt to determine whether artificially low interest rates are positively or negatively affecting consumption. There has been speculation on whether the United States needs to raise the effective federal funds rate to provide financial institutions the incentive to lend money and increase household consumption. The Federal Reserve is currently keeping the effective funds rate between 0 and .25 in hopes of increasing consumption levels. This paper uses fifty years of interest rate data to narrow in on an optimal interest rate that leads to …