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<p>[QUOTE=&quot;Troodon, post: 347690, member: 4626&quot;]Won&#039;t do much to oil prices... that&#039;s set by too many external factors for the US to be able to control significantly (believe me, we&#039;d love to control it if we could.)</p><p><br /></p><p>The most direct result altering the federal funds rate has is on the interest rates of short term loans.&nbsp; They follow suit pretty quickly when the fed funds rate is raised or lowered.</p><p><br /></p><p>A bit more complicated when you talk about other prices.&nbsp; But when the fed fund rate is raised, loans become more expensive, thus money supply is lower; this will slow down the economy but also slow down inflation.&nbsp; Lowering it has the opposite effect; loans become cheaper, money supply is higher, thus the economy speeds up by inflation goes up.&nbsp; Managing the fed funds rate is a balancing act between keeping the economic growth at a healthy pace but also keeping inflation at a reasonable level (think of inflation like blood pressure; it has an optimal rate, and is bad for the economy if it is too low or too high.)&nbsp; Basically what the Federal Reserve tries to do is stabilize the economy (it&#039;s a common misconception that their job is to &quot;help&quot; the economy by always encouraging growth; they just want the economy to be stable.)</p><p><br /></p><p>When inflation goes up, prices go up (which is basically the defintion of inflation.)&nbsp; You can expect prices to go up as inflation does.&nbsp; Precious metals will go up partly as a result of just general inflation, and partly as a result of the increased demand for them when the overall world economy is weaker or at least more uncertain.&nbsp; Because there is a huge lead time to being able to produce more precious metals (have to find them, mine them, refine them, etc.) the prices take a while to react as intially the increased demand can not be quickly reacted to with increased supply.&nbsp; So you can expect precious metals prices to be pretty high for a while, even after the economy recovers.&nbsp; But eventually supply will catch up, and the prices will settle.</p><p><br /></p><p>Too early to tell if we&#039;re in a recession (which is defined as 2 or more consecutive quarters of negative GDP growth) but it can be said that it is definitely slowing down.&nbsp; That with high oil prices, inflation, and genral uncertainty about the economy, you can expect precious metal prices to be pretty high for quite a while.&nbsp; They will drop off eventually, but precisely when, who knows... best you can hope for is an educated guess.[/QUOTE]</p><p><br /></p>

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