Fed cuts key rates to historic low levels
December 16, 2008 by admin
The FOMC cut rates to historically low levels today in a move aimed at spurring economic growth and lending. The Fed today cuts the fed discount rate down to .25%, a 75 basis point cut from its previous level. This historic move will benefit consumer with loans that are directly tied into the prime rate. The dramatic cut with rates is the last big move that the FOMC can offer related to cutting the monetary policy to try and spur lending. The fed remains committed to ramping up other programs to try and spur growth. The moved earlier this month to purchase over 700 billion of mortgage backed loan securities, a move that directly resulted in a dramatic drop with mortgage interest rates. The economy has been taking significant steps backwords over the past 90 days as job losses and home foreclosures are surging. A recent report indicated that one in every ten homes in the U.S. is behind on their mortgage payment as consumers struggle to maintain their payments as the economy worsens. The Fed will have to work in collaboration with the government and treasury to help spur a rebound in economic growth in 2009.
December 13, 2008
December 13, 2008 by admin
The stock market rallied late on Friday as investors looked past the Senate’s decision to fillibuster the auto loan bailout package. The market was off by over 300 pts in pre market activity as the news hit that the auto industry may not receive the bridge loan that they desperately need. The market got an immediate boost when the white house acknowledged that they would look to use funds from the TARP program to provide working capital until the new administration gains its foothold in Janruary.
The market also reacted favorably to a PPI report that indicated their is a low level of producer price pressure in the market. This will make it easier for the FOMC to meet and potentially further reduce the Fed Funds rate next week. With a prime rate below 5%, consumers will save who have credit card debt and home owners with home equity loans. Mortgage rates continue to hover near historic lows for 2008 and offer great opportunities for home owners looking to refinance or purchase in the near future.
October 29, 2008
October 29, 2008 by admin
Following one of the largest rallies in recorded history, today the Fed lowered the fed funds rate down to one percent. The stock market which has dropped over thirty percent in the past six months appears to be closing in on a bottom. Most traders believe the market is now in a trading range between 8000 & 9000 and that the bottom and top of this market is 7800 and 9500, if the top or bottom of this market is breached then the markets could move agressively.
The change in the Fed Funds rate was expected by most economists and a good sign that the Fed is working to help to restore confidence into the market and help to slow down the recessionary fears. Mortgage rates have been trending up and are still above six percent on most fixed rate loan programs. The stock market is likely to continue to be volatile and could have a large move next week following the election.
Credit card rates could move lower with another fed rate cut
October 26, 2008 by admin
The FOMC meeting this week could add some needed relief for the average consumer. The negative news that has been flowing from news papers and media outlets have pushed the idea of a recession from a possibilty into a full blown reality.
Consumers who have credit cards that are directly tied into the prime rate should are likely to see an additional decline of 1/2 pt to their interest rates. The prime rate has dropped sharply in 2008 as the fed has moved to drop the fed funds rate to help unfreeze the credit markets, as the fed funds rate has declined lenders typically follow suit and lower the prime rate.
Not all consumers will benefit from the rate cut as card issuers often have floors tied into the rates they offer to consumers. This essentially means they reserve the right to have a limit to how low interest rates can move on their cards.
Lenders have pulled back sharply on the amount of offers they are now sending to consumers. The fallout in the credit markets has effected consumer loans, auto loans and credit cards as banks look to mitigate the risk in their credit portfolios.