Yesterday the Federal Reserve bank cut their key rate by another .5%, bringing it to an exceptionally low 1.5%.  What does that mean to you?  A couple, very important things.  For one, every bank will be announcing new, lower savings rates.  Your fancy online savings account ( you do have a fancy online savings account, don’t you? ) will now earn you a lower rate.  Every dollar you’ve worked so hard to save up will now be taking a breather, and won’t be working as hard for you.

As if that weren’t enough, lowering interest rates is a very inflationary thing to do.  Basically it works like this – lower rates encourage everyone to borrow more.  Cheap money is more attractive than expensive money, after all.  As more borrowing takes place, the money supply increases, and prices go up as a result.  Economics 101, for the college graduates among us.  Inflation is already bordering on out of control – something you surely have noticed at the grocery store.  Increasing inflation is sure to make it tougher on all but the super rich.

What can you do?

Bend over.  What else can you do?  If times were different, I might say toss some of your spare cash in the stock market, so you have a better chance of beating inflation.  However, the stock market is in shambles with no signs of a bottom being near.  Hold on to that cash, even though it’s value decreases by the day.  I wouldn’t say it’s the best place to be, but rather the “least awful” place to be.