Federal Funds Rate Lowered By .50%
Yesterday Ben Bernanke and crew lowered the target Federal Funds rate by .50%.
While this was reported as a surprise by many, futures trading prior to the cut indicated a 100% certainty of at least a .25% cut and the effective Federal Funds rate had been waffling around a .25% cut for nearly six weeks.
Neither futures nor the effective rate are criteria for what the Fed actually does, but a cut of only .25% might have generated headlines of “Too Little, Too Late.”
As a result of the cut, stocks have skyrocketed on hopes that cheaper credit will bolster earnings and bonds weakened (rates increased) on worries of increased inflation as well as pressure from investors moving funds into stocks.
I’ve written several stories on what this means for mortgage rates so no need for additional commentary:
What Happens to Mortgage Rates When The Fed Starts Easing?
The Relationship Between Federal Funds Rate and Mortgage Rates
Prime Rate Down But Mortgage Rates Up?
Who Sets Mortgage Rates?
Should You Care About the Federal Reserve?
And here’s a nice article from the Wall Street Journal on what it means for you beyond mortgages.
Inflation Licked? Where are Mortgage Rates Going? « Mortgage Planning ABC said,
September 28, 2007 @ 1:30 pm
[...] inflation also gives the Fed a green light to lower short-term rates (Federal Funds Rate) to support economic growth, if [...]