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Fed Cuts Key Rate by .5% Point

By: GreenPanda | Date posted: September 19, 2007 (9:18 am) | Write a Comment (2 Comments)

The Federal Reserve Tuesday responded aggressively to a housing downturn that threatens to spread to the broader economy, cutting its main benchmark interest rate by a half-percentage point and broadly lowering borrowing costs.

read more | digg storyWhat doe sthat mean for us? An article on abcnews.com provides an answer.

Rate cuts take months to fully work their way through the economy, but consumers and businesses could quickly feel some impacts from Tuesday’s cut in the federal funds rate to 4.75% from 5.25%. The fed funds rate is what banks charge each other for overnight loans.In continuation of the Fed’s cut, the Wall Street Journal has a wonderful article, What the Rate Cut Means for You. Here’s just a snippet of the topics discussed. I highly recommend this article and this week the Wall Street Journal’s content is open and free to peruse. Rupert Murdoch wants to make this permanent, but no decision as of yet. Check out this wonderful resource.

RATE EXPECTATIONS

Here’s how the Fed’s rate cut could affect your wallet:

Expect lower rates on home-equity lines of credit and some credit cards.

Brace yourself for lower yields on money-market funds and savings products.

Borrowers with adjustable-rate mortgages tied to Libor aren’t likely to get immediate relief.

Fixed-rate mortgage rates could move higher if inflation worries grow.

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2 Comments
  1. Comment by Aaron — September 19, 2007 @ 2:32 pm

    The WSJ article you referenced is great. The future of fixed-rate mortgages is very unclear right now. I think the Fed made the right move as a precursor to further economic problems coming down the pipeline. Inflation must be watched though. I added my thoughts on my blog:

    http://www.growyourfunds.com/2007/09/federal_reserve_lowers_rates_m.html

    »crosslinked«

  2. Comment by GreenPanda — September 19, 2007 @ 8:08 pm

    Thanks Aaron! Your post offered an informed opinion about the cut and what may happen as a result. It’s my hope that we don’t enter into a recession. Like you stated, we have to look at more data to get an idea of what will happen next. How do you feel about the WSJ being open and free online?
    I’m not a fan of Murdoch, but I am inclined to support him in this case. I’m a newsstand buyer of the journal and will continue to do so. What I appreciate with the online feature is that I can look at archives, which will help me my last semester with several papers.

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