NEW YORK (CNNMoney.com) — The Federal Reserve hinted Wednesday in minutes from its latest meeting that more interest rate cuts might be needed if the deterioration in the credit markets leads to deeper problems for the housing sector and overall economy.
The central bank lowered its key federal funds rate - an overnight bank lending rate that affects how much consumers pay for various types of debt, including credit cards, home equity lines of credit and auto loans - by a quarter of a percentage point on Dec. 11 to 4.25 percent.
That marked the Fed’s third consecutive rate cut since September as the central bank attempts to deal with the subprime mortgage meltdown, which has caused cash-strapped consumers to default on their loans and banks to report billions of dollars in losses tied to bets on bad mortgages.
In the minutes, the Fed said that “some members noted the risk of an unfavorable feedback loop in which credit market conditions restrained economic growth further, leading to additional tightening of credit” and added that “such an adverse development could require a substantial further easing of policy.”
As such, traders are now betting that a rate cut at the Fed’s next meeting, a two-day session that concludes on Jan. 30, is certain. The question is simply how big of a cut it will be.
As of today, Wednesday January 2nd, we are already seeing some movement in the rates. The bond market is up and that has driven the 30 year interest rate back down into the 5’s. If you would like to take advantage of historically low rates, call me.
Craig Pollard is a mortgage professional and owner of Texas Mortgage Team. He specializes in the Dallas Fort Worth area and is a frequent voice on Texas Home Central’s blog. Craig can be reached at CPollard@Texasmt.com or 972-317-9900
This entry was posted on Wednesday, January 2nd, 2008 at 6:14 am and is filed under Money Matters, Mortgage, Real Estate, Refinance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.