Fed cuts rate by .75% to 3.5%

[Enron Exec]

So with these continued rate cuts, are they really devaluing the dollar further? Should ppl in the market for a house start looking? Where can we hide our money. Where do we dare invest? Im putting my money on good ol fashion ammo. :lol:

http://biz.yahoo.com/ap/080122/fed_interest_rates.html

WASHINGTON (AP) -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.
The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.

Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world's largest economy was spreading worldwide.

Despite the Fed's bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that "appreciable downside risks to growth remain" and officials pledged to "act in a timely manner" to deal with the risks facing the economy. The action was approved on an 8-1 vote.

Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.

"The world's stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.

The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary.

Many analysts said if the carnage continues in stock markets, the Fed will move to cut rates again at its Jan. 29-30 meeting.

"This move is not an instant fix," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "The economy is still staring recession in the face, but at least the Fed now gets it."

In addition to cutting the funds rate, the Fed said it was reducing its discount rate, the interest it charges to make direct loans to banks, by a similar three-quarters of a percentage point, pushing this rate down to 4 percent.

Commercial banks responded to the Fed's action on the funds rate by announcing similar cuts of three-quarter of a percent on its prime lending rate, the benchmark for millions of business and consumer loans. The action will mean the prime lending rate will drop from 7.25 percent down to 6.50 percent.

The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States.

The Fed action occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession. Many markets suffered their biggest declines since the September 2001 terrorist attacks.

In its statement, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."

The central bank said that the strains in short-term credit markets have eased a bit, but "broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."

The move caught financial markets by surprise. Many had expected the central bank would wait until its meeting next week to make any move in interest rates. The Fed made the move before markets had opened in the United States.

Before Tuesday's move, the Fed had cut interest rates three times, beginning in September, the month after a severe credit crunch had roiled Wall Street and global financial markets. The Fed cut the funds rate by a half-point in September and then by smaller quarter-point moves in October and December.

"The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risk," the Fed statement said.

The Fed's action was approved on an 8-1 vote with William Poole, president the Fed's regional bank, dissenting. The statement said that Poole objected because he did not believe current conditions justified a rate move before the Fed's meeting next week.

[lube'd]

WOO! Right when I am about to refinance my car loan.

[NisAznMonk]

What exactly do these cuts help us in? I've always been confused about this.

[arabretard]

What exactly do these cuts help us in? I've always been confused about this.
they dont help us. since the prime rate has dropped below 4% the economy is going to go into a recession. basically the value of the dollar has gone down once again, weakening the economy.

[NisAznMonk]

they dont help us. since the prime rate has dropped below 4% the economy is going to go into a recession. basically the value of the dollar has gone down once again, weakening the economy.

So how do newsreporters claim that this is a great time to buy into the stock market? If the USD is going down in value at the same rate as many of the stock markets then isn't the cost of purchasing the same?

Will it help out home loans, car loans, or affect any interest bearing accounts like savings, etc?

Sorry about the n00bish questions.

[Enron Exec]

The Fed lowers interest rates in hope of stimulating the economy by giving ppl an incentive to buy large things like cars and homes because now you pay less interest when using credit.

Me.. i think its time we pay the piper.

[tit$]

the best time to buy stocks was right before the fed cut rates and the DOW went back up.

down 400 points? WOW to that shit.

[edex]

ugh. The cuts are used to stimulate the economy and investors to purchase more,to increase expenditures and encourage consumers to purchase because of low rates.. This is bad for lendors, but good for borrowers. But at this point like arabretard was saying, the value of the dollar has gone down, so it limits your purchasing value per dollar.

Correct me if I'm wrong, it's been more than a year than I took Macro.

[arabretard]

this is a great time for credit companies. the value of the dollar is less so essentially people are not able to buy things with cash. as a result everything is put on credit since the interest rates are lower. right now might not be the best time to buy a house or any high dollar amount. the economy isnt going to boost itself up anytime soon so the value of these expensive items is going to steadily decrease over the next few years/months. if youre planning on buying a home wait a few months and it might be cheaper

[edex]

The Fed lowers interest rates in hope of stimulating the economy by giving ppl an incentive to buy large things like cars and homes because now you pay less interest when using credit.

Me.. i think its time we pay the piper.

http://www.census.gov/indicator/www/m3/adv/pdf/durgd.pdf
Exactly, these are called durable goods (i.e that last more than a year). Think of real estate, cars, appliances, etc. I have the figures for Oct. and Nov. of 07, and there was little to no increase in the purchases of durable goods for the U.S. So now would be a good time to buy, not sell.

[tit$]

this is a great time for credit companies. the value of the dollar is less so essentially people are not able to buy things with cash. as a result everything is put on credit since the interest rates are lower. right now might not be the best time to buy a house or any high dollar amount. the economy isnt going to boost itself up anytime soon so the value of these expensive items is going to steadily decrease over the next few years/months. if youre planning on buying a home wait a few months and it might be cheaper

thats questionable... part of the reason there's so much emphasis on the economy is because of the housing market crash. there are so many great deals on homes right now it's insane - when the mortgage market gets back to normal these deals on houses WILL go away. what rate you will be able to buy them at is up in the air.

[lube'd]

thats questionable... part of the reason there's so much emphasis on the economy is because of the housing market crash. there are so many great deals on homes right now it's insane - when the mortgage market gets back to normal these deals on houses WILL go away. what rate you will be able to buy them at is up in the air.

That's what I was thinking. Then again I slept through all my finance and economics classes.

I think this is also a good time to consolidate my student loans...

[AXaznAX]

That's what I was thinking. Then again I slept through all my finance and economics classes.

I think this is also a good time to consolidate my student loans...

I think you can call your credit card co. to lower your rates too.

[NisAznMonk]

the best time to buy stocks was right before the fed cut rates and the DOW went back up.

down 400 points? WOW to that shit.


No joke. I was hoping that the market would go down 600-700 points like the morning news reporters were speculating.

Now back to the interest thing. What if the current/future loans have a variable interest rate? Wouldn't that mean it still doesn't help the person what borrowed the money?

[tit$]

No joke. I was hoping that the market would go down 600-700 points like the morning news reporters were speculating.

Now back to the interest thing. What if the current/future loans have a variable interest rate? Wouldn't that mean it still doesn't help the person what borrowed the money?

then get a fixed rate loan :Goofy:

and a huge dive like that would just kill our economy. i'm suprised we aren't all waiting in soup lines with that 400 point drop - that's pretty significant.

[lube'd]

then get a fixed rate loan :Goofy:

how does variable rate work?

[JesseCrx]

How about the people who have been saving for a home to buy it cash?

[1SLOTEGE]

how does variable rate work?

http://www.mtgprofessor.com/A%20-%20ARMs/how_arms_work.htm

Basically the first part of you loan is fixed at a low intrest rate for a certain amount of time, when the set amount of time runs out the intrest rate begins to go up.

[lube'd]

How about the people who have been saving for a home to buy it cash?

I really don't see how people say it affects the value of the dollar. If interest rates are lower (only affects credit) and prices in property value drop, how is it that 150k from yesterday cannot afford to buy a house that costs 1/2 less today?

[edex]

I really don't see how people say it affects the value of the dollar. If interest rates are lower (only affects credit) and prices in property value drop, how is it that 150k from yesterday cannot afford to buy a house that costs 1/2 less today?

high inflation rates. Stay awake in your classes.

[AXaznAX]

high inflation rates. Stay awake in your classes.

so high inflation = high prices = buy less with your $1 = value of dollar decrease?

[lube'd]

high inflation rates. Stay awake in your classes.

I understand that. Did you understand my scenario?

Inflation causes the prices of things to increase. In this case, prices are dropping in the real estate industry. How is it that 150k yesterday is not worth more today due to a slice in prices in the real estate industry? I fail to see how the 150k of yesterday lost value...

[Red]

wouldnt it be more beneficial to wait since this all just started? wait for rock bottom but how does one know when rock bottom is since the market changes every day.

[tit$]

I understand that. Did you understand my scenario?

Inflation causes the prices of things to increase. In this case, prices are dropping in the real estate industry. How is it that 150k yesterday is not worth more today due to a slice in prices in the real estate industry? I fail to see how the 150k of yesterday lost value...

because 150k sitting doing nothin stays 150k, while prices of everything increase at a steady 6% a year.

[bowfinger]

so is this a good time for me to refinance my home loan?or should i wait?
I purshased it back in march of 05. My first loan is at 6.1% and my second is at 7.4%.

[AXaznAX]

so is this a good time for me to refinance my home loan?or should i wait?
I purshased it back in march of 05. My first loan is at 6.1% and my second is at 7.4%.

do you have an adjustable rate mortgage? If so you might have a prepayment penalty. And the rates you get depends on your credit. Pm me if you have any questions.

[tiedupfool]

I know my friend just invested some money in the semi-conductor field (I dont know how to explain it but I think it was some type of stock that bet against semi-conductors doing good and he banked a pretty good chunk of change)

[Limeade]

So how do newsreporters claim that this is a great time to buy into the stock market? If the USD is going down in value at the same rate as many of the stock markets then isn't the cost of purchasing the same?

Will it help out home loans, car loans, or affect any interest bearing accounts like savings, etc?

Sorry about the n00bish questions.

Eh, take that with a grain of salt. This IS a great time to buy if this is the bottom and we are on our way up. However, with everything there are no guarantees and the bottom maybe farther away then we think. Try buying some doggy dow stocks.

[mrbean1130]

man... i just read that article that the OP posted and I had a bunch of questions. Was going to post and then found this thread.

Thanks for putting it into lay terms.


I've never taken any eco classes so all this stuff is kind of foreign to me, but I find it interesting.

[NisAznMonk]

Eh, take that with a grain of salt. This IS a great time to buy if this is the bottom and we are on our way up. However, with everything there are no guarantees and the bottom maybe farther away then we think. Try buying some doggy dow stocks.

I've looked into the stock market just recently when the drops started to happen. My only hesistation is that drops haven't stopped, and it doesn't look like it'll end anytime soon.

[Limeade]

^correct

[Prissy]

Financially, it's going to be a tough year. Feds are going to cut the rates again at the end of January.

Every Finance class I'm in we talk about the subprime lending fiasco and how ultimately the government is going to step in to rescue the financial institutions most impacted by it.

Well, heres to the first step.

[NisAznMonk]

Financially, it's going to be a tough year. Feds are going to cut the rates again at the end of January.

Every Finance class I'm in we talk about the subprime lending fiasco and how ultimately the government is going to step in to rescue the financial institutions most impacted by it.

Well, heres to the first step.


I don't understand how its going to be a tough year financially. Is it because the dollar won't be worth as much, and the prices on goods will be higher?

[Red]

every year is tough financially lol.

[NisAznMonk]

Yep. Just curious why this upcoming year would be any worse than previous years.

[AXaznAX]

Yep. Just curious why this upcoming year would be any worse than previous years.

everything trickle down. "Subprime fiaso" made banks/lenders lose lots of money. Some have gone out of business because of it. so there are lots of layoff in that sector. It is harder for people to get credit to buy houses, which affects many other markets. ie. builders (raw materials), furniture, electronics, etc.

[tit$]

this guy i work with has a mortgage company on the side, just saw the new rate sheets.... might be time to refinance!!

i heard the mortgage rates weren't supposed to drop, but they sure as hell did!

[Red]

this guy i work with has a mortgage company on the side, just saw the new rate sheets.... might be time to refinance!!

i heard the mortgage rates weren't supposed to drop, but they sure as hell did!

we got swamped outa no where yesterday afternoon around 3ish. and they're still comin in strong today. fuckin a.

something tells me this isnt rock bottom yet so im gonna hold off, but prepare, for the situation we talked bout.

[AXaznAX]

this guy i work with has a mortgage company on the side, just saw the new rate sheets.... might be time to refinance!!

i heard the mortgage rates weren't supposed to drop, but they sure as hell did!

wow! i gotta see this for myself

[tit$]

we got swamped outa no where yesterday afternoon around 3ish. and they're still comin in strong today. fuckin a.

something tells me this isnt rock bottom yet so im gonna hold off, but prepare, for the situation we talked bout.

yeah i hear ya -

[dantheman]

shit man i should buy a house :)

im curious to see where we go from here.

[Don]

thats questionable... part of the reason there's so much emphasis on the economy is because of the housing market crash. there are so many great deals on homes right now it's insane - when the mortgage market gets back to normal these deals on houses WILL go away. what rate you will be able to buy them at is up in the air.

Yup...

[VolksFaggin]

So how do newsreporters claim that this is a great time to buy into the stock market? If the USD is going down in value at the same rate as many of the stock markets then isn't the cost of purchasing the same?

Will it help out home loans, car loans, or affect any interest bearing accounts like savings, etc?

Sorry about the n00bish questions.

This is propaganda to get people to start spending money. The Low interest rate is there for more enticement.


BTW I am getting a house or atleast some undeveloped land and put a awesome garage on it. :thumb:

[Mr. MCoupe]

yes yes, buy houses please.

Weaker dollar- also allows Foreign companies to hire more American workers (cheaper for them to do so) especially in fields like Energy (and Houston produces very talented people in that field). As a result, job growth in Houston remains one of the strongest in the country. While our dollar is weaker, we still have jobs growth. I like job growth.

Weaker Dollar- American goods are cheaper to purchase by non-Americans. The trade deficit should shrink. Jobs should remain stable as exports increase. While imports get more expensive (I sure like German products), I like stable employment.

Global Economy ftw

[Michael]

I'm glad I have guns.


But my tech stock jumped 4.5% today :) Now i'm only 40% below where I bought it! I'm willing to take a 25% loss on it at this point haha.

[Justin]

this guy i work with has a mortgage company on the side, just saw the new rate sheets.... might be time to refinance!!

i heard the mortgage rates weren't supposed to drop, but they sure as hell did!

please share the info...I'm closing on my house soon. thx :thumb:

[AXaznAX]

please share the info...I'm closing on my house soon. thx :thumb:

If you are about to close on your house, didn't they already lock your rates?

[Justin]

If you are about to close on your house, didn't they already lock your rates?

No, we didn't lock rates yet. It's still being built but will be done soon. Hopefully closing by March so we should be locking rate soon.

[NisAznMonk]

yes yes, buy houses please.

Weaker dollar- also allows Foreign companies to hire more American workers (cheaper for them to do so) especially in fields like Energy (and Houston produces very talented people in that field). As a result, job growth in Houston remains one of the strongest in the country. While our dollar is weaker, we still have jobs growth. I like job growth.

Weaker Dollar- American goods are cheaper to purchase by non-Americans. The trade deficit should shrink. Jobs should remain stable as exports increase. While imports get more expensive (I sure like German products), I like stable employment.

Global Economy ftw

With this logic wouldn't a weaker dollar actually help our economy?

[Prelude92]

only if europeans were interested in fords :)

[joshoowa]

plan and simple weaker US dollar is good for the world so that foreigners can buy our shit.

[JesseCrx]

Did you guys check CNN recently
http://money.cnn.com/2008/01/30/news/economy/gdp/index.htm?postversion=2008013008

Economy much weaker than expected
Gross domestic product slowed to a 0.6% growth rate in the fourth quarter, raising both recession fears and hope for another deep Fed cut.
January 30 2008: 8:51 AM EST

NEW YORK (CNNMoney.com) -- The economy grew at a much slower pace in the last three months of the year, according to a government report Wednesday that came in well below Wall Street expectations.

[Narcissistic]

didnt the fed just cut again today by half a percent?

[longnguyen714]

^ yep hope they cut some more though

[Narcissistic]

^ yep hope they cut some more though

Eh, the problem really is gasoline. Once that goes up the cost of everything else does.

[Enron Exec]

Its at 3% as of today. Its going to cont to drop. If bad enough, it could reach 1%.

[Narcissistic]

Its at 3% as of today. Its going to cont to drop. If bad enough, it could reach 1%.

what implications could that have on the economy?

[JesseCrx]

So ballah, they bailin' ngaz outta all kindsa sheeit!:Ewave1:
http://money.cnn.com/2008/01/31/real_estate/subprime_bailout_proposal/index.htm?postversion=2008013116

http://i43.photobucket.com/albums/e358/jessecrx/ballerig3.jpg

[DC]

didnt the fed just cut again today by half a percent?

Good lawd, man if they cut the rates once more, it would be stupid for me to NOT refinance.

[Mr. MCoupe]

I don't think it will go any lower. BUY a HOUSE NOW.

[trill]

FUCK MUST BY CAR

[DC]

FUCK MUST BY CAR

That is yet another temptation driving me insane.

[bowfinger]

I just called to refinanced my home and this is what they quoted me:
30 yr fixed @ 6.1 monthly pymts @ $879
15 yr fixed @ 5.5 monthly pymt @ $1182

I currently have a 30yr fixed at 6.3% montly pymts @ 923.33

oh and they dont have any type of closing cost either......
I dont know if i should do it now or wait to see if rates get any lower

[DC]

I just called to refinanced my home and this is what they quoted me:
30 yr fixed @ 6.1 monthly pymts @ $879
15 yr fixed @ 5.5 monthly pymt @ $1182

I currently have a 30yr fixed at 6.3% montly pymts @ 923.33

oh and they dont have any type of closing cost either......
I dont know if i should do it now or wait to see if rates get any lower


Wow, I'd really consider jumping on that if there's no closing costs or fees.

[aznsupra]

FED RATE CUTS

"they dont help us. since the prime rate has dropped below 4% the economy is going to go into a recession. basically the value of the dollar has gone down once again, weakening the economy." (arabretard)

NO.

This was done to obviously ease the money supply in an effort to stimulate the economy as to prevent the US economy from falling into a recession.
not put it in one.

"This is bad for lendors, but good for borrowers." (edex)

WRONG

since when did making loans at a bank become bad? last i checked, that was their main source of revenue. if rates are lower, making it more attractive for ppl to borrow, ppl would want to borrow even more right? i think what you meant to say was that its GOOD for lenders and GOOD for borrowers.

"so high inflation = high prices = buy less with your $1 = value of dollar decrease?" (axaznax)

i wouldnt exactly say the dollar is losing value though. thats more along the lines of the dollar being measured against another currency. anyways, if that coke used to cost 50 cents, you could by 2 cokes. but with inflation now that coke cost 65 cents. now how many can you buy with a dollar? just 1.

"Inflation causes the prices of things to increase. In this case, prices are dropping in the real estate industry. How is it that 150k yesterday is not worth more today due to a slice in prices in the real estate industry? I fail to see how the 150k of yesterday lost value..." (lube'd)

you are only taking into consideration the price of real estate. real estate is just supply and demand. what happens when nobody can buy all that expensive real estate, or in our current economic state, cant get approved for a loan for such real estate? you begin to have an oversupply of it. if you took economics you know that when supply is high, what do prices do? the 150k you speak of....how many gallons of gas can it buy today versus 1 yr ago? how many gallons of milk can it buy today versus 1 yr ago? how bout healthcare and prescription drugs? you get my point. that is inflation and the decrease in spending power, while you maybe able to buy more home for your money currently, outside of that, thats about it.

K

[VolksFaggin]

When they just print more money to ease the economy and there is nothing backing it, then naturally the dollar is worth less.

I would be willing to say the dollar is losing its value. Its losing its value due to over printing of money and lack of a standard for the dollar to be backed against.

The values of other countries money hasn't increased, the dollars has just become worth less. This can also be seen when you compare the cost of a ounce of gold now vs 2 years ago, its almost doubled. Its not because golds worth more, its our dollar doesn't buy as much.

I personally believe this is a elaborate plan to drive our economy into the ground so they can enact the NAFTA inspired North American Union, but I am just a nut.

[JesseCrx]

The stimulus package is like anal lube for the American people. They're giving it to you so that when you getting fucked it won't hurt so bad.

http://www.nytimes.com/reuters/business/business-usa-economy-services.html?_r=1&oref=slogin

[JesseCrx]

For those of you interested in the value of the US Dollar, keep an eye on the info presented in this thread
http://www.houston-imports.com/forums/showthread.php?t=444662

It will be interesting how Iran's stance on the dollar could effect us all.