Today’s Editorial January 24: Rate cuts will help, a little

There’s tempered good news about the cost of living in the Cayman Islands.

It’s actually going down – a little.

We should all see a reduction in our electricity bills when we get them for January usage.

Earlier this month, we reported that property insurance premium rates are heading down following a sharp increase after Hurricane Ivan in 2004. The approximated 10 per cent reduction isn’t a whole lot, but every little bit helps.

Yesterday many banks in the Cayman Islands announced that they’re reducing their lending rates in response to the US Federal Reserve’s emergency reduction of its prime rate by three-fourths of a percentage point.

That means those who have loans with the banks that do drop their rates will be applying more of their payments to the principle of the loan instead of the interest.

And it means there is an opportunity for cheaper borrowing.

But don’t be in a rush to head for the bank and borrow just because rates are down.

All interest rate movements are cyclical in nature.

Just because rates look favourable for borrowing now, those who do so could find them in a financial pickle when the rates go back up and they’ll have to pay more.

Unfortunately all of the good news of falling prices for electricity, insurance and loans is tempered by a story in the Wednesday edition of the Compass where we reported that price increases for standard household goods, vehicle maintenance, clothing and groceries don’t show any signs of slowing.

It would appear that we’re going to need the money from the interest rate cuts, insurance premium drops and lower electricity costs to keep our families fed and clothed and keep our vehicles running.

The cuts overall are welcome and there’s little we can do about prices of good coming from other countries.

The best thing to do is cut back where we can, take advantage of lower rates, be frugal and save.

Lord only knows what is in store for the Cayman Islands as the US heads into what most believe is a recession. Some believe it’s already there.

We can only hope that our economy doesn’t suffer.