The Fed Cuts Both Ways

Low interest rates are great for borrowers. Savers must get creative to earn a decent return. Here's how

The fed bellied up to the bar last week and ordered a double. Greenspan & Co.'s decision to drop short-term interest rates by half a percentage point surprised Wall Street--which had expected a quarter-point cut--and brought rates to their lowest level in 41 years. That might help spur the economy by making it cheaper for businesses to borrow, but there's a downside. With inflation running at 1.8%, your bank savings or money-market fund yielding barely 1% is becoming a money loser. If you want safety with reasonable income, you'll have to get more creative.

The rate cut "doesn't create wealth," says...

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