Federal Reserve Reduces Overnight Rate
The Federal Reserve today cut its short-term interest rate by a half point, reducing it to 1%. This matches the lowest level for overnight bank lending. The last time it was this low was from June 2003 through June 2004. Prior to this the lowest rate occured during the Eisenhower Administration in 1958.
This is the ninth reduction by the Fed since September 2007 with the last once occurring earlier this month on October 8th when the rate was reduced by a half point. The hoped for result of the Fed’s action is to spur economic activity and prevent the country from plunging into a deep recession. This hope is pinned on the fact that the fed funds rate is used to establish rates for things such as consumer loans, home equity lines, credit cards as well as many business loans.
It is likely that the anticipation of today’s rate cut led to a nearly 900 point gain on Wall Street yesterday. What will happen tomorrow, though, is anybody’s guess. My sense is a lot of folks are awaiting next Tuesday’s election to see the direction in which the country will go.
To this end, many analysts (both financial and the kind with couches you lay on as you recount your childhood) are hazarding that gut-wrenching times are likely ahead of us. Economic numbers expected tomorrow likely will reflect another fall in Gross Domestic Product (the measure of the value of all the goods and services produced in the country), making it two straight quarters that the GDP has slid, thus fitting the standard definition of a recession.
What this means to the housing market on the national level and in Chicago is subjective. Many consumers feel that there is little credit available to finance a home purchase but lenders say that that’s not the case. Perhaps the latest action by the fed combined with the election of Barack Obama will engender continued positive market activity.
As I gaze into my crystal ball what I see is a nice level of activity for the period following next Tuesday’s election through mid-December. A one month hiatus for the holidays will then occur and be followed by a spike in activity with the new year’s arrival and the inauguration of our new president.
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[...] Federal Reserve Reduces Overnight Rate Another rate reduction by the Fed, the 9th since September ‘07. The hope is that a global and national recession can be mitigated, though time will tell. Lower rates should free up funds for credit,… [[ This is a content summary only. Visit my website for full links, other content, and more! ]] [...]
[...] Federal Reserve Reduces Overnight Rate Another rate reduction by the Fed, the 9th since September ‘07. The hope is that a global and national recession can be mitigated, though time will tell. Lower rates should free up funds for credit,… [[ This is a content summary only. Visit my website for full links, other content, and more! ]] [...]