Gearing Up for Another Fed Rate Cut
Another Fed rate cut is in the works. Most analysts and Fed watchers expect another rate cut tomorrow at the Fed meeting. The only real point of contention at this point is whether it will be a 25 basis point cut or a cut of 50 basis points. Global credit markets, and notably the U.S. credit market, has been in a bit of a freeze since the subprime lending crash last summer. Newsday reports on the fears associated with credit market issues:
Although there is no solid evidence yet that consumer or business spending has been affected by a freeze in global credit markets, “financial conditions … are signaling a slowdown, and a potentially meaningful one,” Robert V. DiClemente, chief economist at Citigroup Global Markets, said in an interview. “If financial conditions are tight and unsettled, it’s something like someone messing with the plumbing in a house … people don’t transact and intermediate properly, and you bring a whole lot of activity into question.”
The Fed rate cut will mainly affect the rate at which banks lend money to each other. But this also has effects on mortgage rates, credit card rates and other financial transactions. The stock market is one of these other financial markets; a Fed rate cut is expected to inject confidence into the market. Indeed, as First Business reports, the Fed rate cut is likely to affect even the most ordinary among us.
Tags: Fed rate cut, global credit markets, home mortgage loan, mortgage blog,
subprime lending, mortgage rates, U.S. credit market
