Federal Reserve Cuts Fed Funds Rate by 1/2 Percent on 01/30/2008

Federal Open Market Committee Meets (FOMC)

The FOMC met on Tuesday and Wednesday of this week to discuss interest rates given the shaky state of the economy, the mortgage industry and the credit markets. 

FOMC Cuts The Fed Funds Rates

And, as expected, even on the heals of a 3/4 point (.75%) Fed Funds rate drop last week, they dropped the Fed Funds rate again by 1/2 point (.50%) in order to help stimulate the economy. 

Fed Funds

It is important to note that a drop in the Fed Fund rate does not usually affect rates charged on mortgage loans, or at least not immediately.  Mortgage loans rates are tied to the bond market and not the spot rate or over night Fed Funds rate that banks charge or pay each other. 

The drop should begin to effect credit card rates, installment debt, commercial loans tied to prime, etc.  The effect the combined rate drop of 1.25% will have on the economy will not be known for a little while.  It usually taxes about six months for the rate drop to filter down in to the consumers pockets and get them spending again.