The Fed drops the Funds Rate to 1.5%
Rhonda Porter on 10 8, 2008
This morning, the FOMC cut the Fed Funds rate 0.5% to 1.5% in a globally coordinated move in advance of the scheduled FOMC meeting October 28-29, 2008. Another rate cut at the scheduled meeting is not out of the cards.
From the Press Release:
“Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions….
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.”
The FOMC does not directly control mortgage interest rates, which are based on mortgage backed securities (bonds). Actions of the Fed does influence mortgage interest ratesas traders/markets will react accordingly. HELOCs based on the Prime Rate (which follows the Fed Funds Rates) will enjoy a lower rate from this move (if the rate is unfixed).
Mortgage interest rates are for the most part unchanged…but the day is young! The markets continue to be very volatile. The DOW is currently down over 200. Treasury Secretary Paulson will be speaking later this afternoon…which may impact markets.
I’ll be posting a rate update tomorrow at Rain City Guide…if you can’t wait, then check out my live rate quotes.
About the Author: Rhonda Porter
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4 Responses to “The Fed drops the Funds Rate to 1.5%”
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Mortgage rates are detoriating. Hopefully borrowers are not playing around with floating rates during turbulent times.
most people dont know that FED actions are on the opposite side of a see-saw than long-term rates… they typically act in an inverse relationship. Well done Rhonda. Great post.
Chris the implementer
There is no direct, indirect, causal, or inverse relationship or correlation between the fact that short term and long term interest rates move in opposite direction. The Fed makes decisions in attempts to influence short term rates. The long term interest rates are influenced by the MBS bond yields selling at par, discount or premium prices based on inventor’s fears of future inflation.There is no direct, indirect, causal, or inverse relationship or correlation between the fact that short term and long term interest rates move in opposite direction. The Fed makes decisions in attempts to influence short term rates. The long term interest rates are influenced by the MBS bond yields selling at par, discount or premium prices based on inventor’s fears of future inflation.
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