Fed Slashes Interest Rates By 50 Basis Points

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The Federal Reserve slashed benchmark interest rates by a half point in an agressive move to prevent the economy from moving into recession and to ease the pains of the housing bubble. The decision to cut the overnight federal funds rate from 5.25% to 4.75% was unanimous. This is the lowest level since May of 2006 and the first time the Fed has cut interest rates since June 2003. It was the first 1/2 point cut since November of 2002.

The Fed also lowered its discount rate it charges banks for direct loans by the same percentage.

"The committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth," it said.

The stock markets responded favorably by moving higher as most analysts had only predicted a 1/4 point cut. The Dow was up nearly 2.4% to 13,723 in late trading Tuesday.

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Prices have risen since 2001 for sustainable reasons. The interest rates dropped significantly and as most people know people make their buying decisions on not how much something costs but how much will it cost them monthly. With rising incomes and lower rates people simply could afford to pay more . Speculation has effected some markets and that will correct. Real estate increases like a set of stairs, we are no longer on the riser but the tread. I think we will tread for quite a while.

Above Posted By: Joe | Wed, 19 Sep 2007 17:16:18 EST

In 05, homes that were valued and worth only approximatley $150,000, were ridiculously priced and sold in 06 for $500,000 to $600,000. The lowering of ½ point on the interest rates is only a minor step to correct the housing market. Speculators and consumers that purchased inflated priced properties are now complaining that there are no buyers, or are facing foreclosure. The giant leap required to correct the housing market is that property value must go down to reality as fast as it went up.

Above Posted By: jose | Wed, 19 Sep 2007 11:21:20 EST

Interesting thing though is that mortgage interest rates actually went UP after this news because they are tied to the bond market, and the bond market was weakened by the stock market rally.

Above Posted By: Anon | Wed, 19 Sep 2007 06:23:10 EST

Fed Slashes Interest Rates By 50 Basis Points

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