In a desperate attempt to throw a life preserver on the sinking economy, Fed Chairman Ben Bernanke and his crew cut key interest rates like horror flick villains.
The Fed lowered both the federal funds rate and the discount rate (how much banks pay to borrow from the central bank) by three-quarters of percentage point, hoping to inject more liquidity into a credit-starved market. The move was somewhat of a surprise, both in its timing and size of the cut. It's more than a week until the Fed's next regularly scheduled meeting.
The cuts may also help strapped home owners who fear rising interest rates on adjustable mortgages, since many are indexed to the Fed funds rate. One key to our recovery will be keeping people out of foreclosure and reducing the number of homes for sale in the market.
Some market watchers think that the Fed will cut rates again at the next meeting, but with rates already so low, the Fed has to be concerned about fueling inflation.
Wow, this is great news for first time homebuyers - and especially for those that need to refinance for a better rate right now.
I'll be interested to see how quickly the banks pass on this savings to the consumer.
Posted by: Chantal in Orlando | Thursday, January 24, 2008 at 11:26 PM
The feds cutting the interest rate could be a very good thing. Many home buyers are waiting on the sidelines until they see the real estate market settle or start to go back up. With interest rates so low home buyers will be able to afford more and possibly the people on the sidelines will start to buy.
Posted by: ExpertHomeOffers | Tuesday, January 29, 2008 at 12:54 PM