The Fed is spooked by the possibility of a recession. So, they cut the federal funds rate rates 0.25% today. It is now 4.25%, which means the prime rate will be 7.25% (a full 1% reduction since this summer). This should further erode the dollar against the major currencies (making Arizona real estate even cheaper for Canadians, British and Europeans). According to Bloomberg:
The Federal Reserve cut its benchmark interest rate by a quarter-point to 4.25 percent to prevent the housing slump and credit squeeze from undoing the six-year expansion.
The change “should help promote moderate growth over time,” the Federal Open Market Committee said in a statement after meeting today in Washington. “Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.”
For those in the mortgage market, remember that the federal funds rate and the 30 year mortgage rate are not related. The Fed cut rates by 0.50% in their last meeting.
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Fed Cuts Rate And Mortgage Interest Rates Rise
Fed Raises Rate Another Quarter-Point
Fed Cuts Rate 0.75%, Prime Now at 5.25%
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on Dec 13th, 2007 at 12:11 pm
I think we are already in a recession. Most people in the US live in a state of denial and the corporate media is doing its best to camouflage the most fundamental underlaying problems in the US Economy.
Just read what Jim Sinclair wrote in 2006.
I don’t consider myself a “doom-and-gloomer” however I believe that things are considerably worse than the mainstream media reports.
on Dec 13th, 2007 at 12:42 pm
Christoph,
Very intersting. We could very well be in a recession. There is a serious time lag to the data. Plus the media.. well what to say about the media??