Fed Interest Rate Cuts - A Bold Move for the Economy

The Federal Open Market Committee, the monetary policy arm of the Federal Reserve, held their September meeting today and by unanimous decision, lowered both the Fed funds and Discount rates by 50 basis points each. It was a bold move to help an economy trying to deal with the recent developments in the financial markets; specifically, a tightening of credit conditions that was intensifying the housing correction.

The rate cuts are designed to forestall adverse economic conditions, foster price stability, sustain growth and hopefully ward off the potential for a recession. In addition, they will help with the growing foreclosure situation, keeping mortgage rates low and give a boost to the ailing housing market.

Recent evidence shows that the risk of core inflation improved modestly allowing the Fed to make the interest rate moves. The decline in the September's Jobs Report and today's Producer Price Index (down 1.4% overall and 0.2% at its core) gave them the confidence to lower rates in the face of the declining dollar and rising oil and gold prices. Stocks and treasuries rallied on the news and at least for now, the rate cuts have brightened the future economic outlook.

Metro Mortgage Company is a full service federally regulated Mortgage Banker specializing in originating Conventional, Jumbo and FHA/VA loans. For more information on current interest rates, please contact us at your convenience.

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