Emergency Fed Funds Rate Cut: 75 basis points!!!

Mortgage and Lending with Diverse Solutions

Just when we thought it was going to be a slow week on the Economic Calendar, we get this breaking news... Emergency Fed Funds Rate Cut: 75 Basis Points (a.k.a. .75% down to 3.50%

From MarketWatch:

"The 75 basis-point surprise cut came after global financial markets sold off in dramatic fashion on Monday on fears that bad bets in credit markets could spread further and drive the U.S. economy into recession. 
It was the largest cut in the federal funds rate since 1982, after the FOMC had driven rates to 20% to kill inflation.
U.S. stocks opened with huge losses. The Dow Jones Industrial Average was down more than 450 points, or more than 3%. Treasurys rallied.
'This move is not an instant fix,' wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. 'The economy is still staring recession in the face, but at least the Fed now gets it.'

So far, the Bond Market is performing well in light of the rate cut. But my recommendation still remains: continue to Lock-In your Mortgage Rates! 

Remember, Stocks and Bonds compete for the same investment dollar. This means that investors can choose to invest their money in the Bond Market or they can choose to invest their money in the Stock Market. If we start to see money pour back into the Stock Market, this will deteriorate mortgage rates. 

Comments (1)

Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
Ricardo, I heard this on the radio in the car this morning. It will be interesting to see what effect the cut will have. At the very least, my payments on my HELOC should go down.
Jan 22, 2008 02:08 AM