Fed Cuts Rates to Historic Low [fed funds from 1.0% to 0.25%]

Wall Street Journal ^

[Sub-Driver]

Fed Cuts Rates to Historic Low

By BRIAN BLACKSTONE and MAYA JACKSON RANDALL

WASHINGTON -- U.S. Federal Reserve officials on Tuesday slashed official interest rates to an historic low range to combat a deepening recession and signaled they will keep rates "exceptionally low" for some time amid rapidly waning price pressures.

Officials also signaled a new phase for policy in which lending programs financed by the Fed's ballooning balance sheet, a process known as quantitative easing, replace the federal funds rate as the Fed's primary policy tool.

The Federal Open Market Committee voted unanimously to reduce the target fed funds rate for interbank lending from 1% to a range of zero to 0.25%, the lowest since the Fed started publishing the funds target in 1990. The market-determined effective fed funds rate already has already hit record lows in recent weeks. (Read the Fed's statement.)

Economists had expected a smaller cut of just 0.5 percentage point, and hadn't envisioned the Fed setting a range.

[BGHater]

[Mr. Jeeves]

Still penalizing savers to bail out speculators. Didn’t work in Japan - won’t work here.

[illiac]

Mortgage rates will go up in the short haul, then decrease. We are seeing rates in the 4.75% range now. Eventually this may reduce the rate to as low as 4%.

As far as getting a loan goes.....who knows. The credit market has been tight. Only those with good credit and income have been able to refi - however, I am seeing the mortgage brokers refinancing lower credit scores.

[earlJam]

Next step, the fed will start paying people to borrow money.

[nominal]

“reduce the target fed funds rate for interbank lending from 1% to a range of zero to 0.25%”

Free loans for banksters! woohoo

This is insane...

[quack]

Mortgage rates will rise because this will lower the yield on 10 yr treasuries,again.Dollar goes down,mortgage rates go up.

[garbanzo]

Fedese for “gas up the choppers.”

choppers? Probably more like C-130s

[Ancesthntr]

If they could take it down to 4-4.5% on a 30 year fixed, can you imagine how much money would begin to flow into the economy.

Lots. Right now that money is available, but being hoarded by fearful banks. Dump it into the economy, increase the velocity of money (because now everyone feels wonderful, the "good times" are back, etc.), and you've got a recipe for a vicious inflation.

[Freedom_Is_Not_Free]

It won’t affect mortgage rates. The Fed buying their own debt is reducing mortgage rates. Cutting the funds rate and trying to hurt the dollar is considered “inflationary” and causes the spreads to go up so it raises mortgage rates. The bottom line though, is that mortgage rates look to be historically low for a long time, until the bond market collapses and crushing inflation occurs (assuming it works to reflate.)

[Puppage]

It was indeed.

River's Edge Mortgage Llc

91 Main Street

Monroe, CT 06468-1630

Phone: (203) 445-0077

This is the CT branch, but I believe they're nation wide.

[Red Badger]

Then you must have had a 7.75 or thereabouts.....

[Tublecane]

The government never met a price they couldn’t fix.

[Xenophon450]

Add the proposed stimulus packages that Barackula wishes to give to the American people. I see the writing on the wall, well now it’s more akin to a warning siren.

[Red Badger]

[blam]

"Right now people are paying the Fed to take their money, with negative yields on short bonds."

Yes...And, that has never happened in this country before, never! (Money is looking for safety only, not interest).

Russians are spending or trading their rubles for US dollars as fast as possible. Russian currency will fold again, shortly.

[Ancesthntr]

Of course, the market bumps up on a non-event. It will give it all back by week’s end. With today’s market volatility, +250 pts is a yawner.

It was up about 266, now it is only up 176. Initial euphoria, followed by a bit of a return to reality. Kind of like a high from a dose of some narcotic.

[TaraP]

It does not matter how low they drop it...

If you do not have a job, no money....Well maybe a few pennies people can muster up in there coat pocket...

The Government is Clueless about there own people...

[Ancesthntr]

Next step, the fed will start paying people to borrow money.

I'd be happy if they'd simply pay my debts off - then I'll happily resume spending (to a limited degree, of course).

[Freedom_Is_Not_Free]

Knee jerk reaction. Nothing more.

[GOPJ]

They can’t cut rates much further, can they?

Nope - the cutting ship has sailed. Hope this works for a day or two...