Fed Rate Cut: Are More Cuts on the Way?
This morning marked an historic coordinated effort by central banks around the world to ease the credit crisis. As the flow of capital has been reduced across the globe, banks have been stepping in to do what they can to alleviate the crisis and get credit moving. Unthawing the credit markets is seen as vital because it affects economies around the world in various ways:
- Consumer spending with credit and debt.
- The ability of businesses to get loans.
- Banks’ willingness to lend to each other and others.
- Available capital in the money markets.
- Mortgages are harder to come by, keeping housing markets unstable.
The idea behind the coordinated action is to help increase the amount of money that is “out there.”
However, it is generally agreed that the action by the central banks is not going to be enough to solve the problems facing the global economy. In the United States, there is already talk of further rate cuts in the coming months, depending on how things go. That would bring rates even below the already low 1.5% reached today. The move should have some effect on mortgage interest rates, provided the credit market really does ease. And it offers a good opportunity for those struggling with consumer debt — especially credit cards — to more efficiently pay it off.
Britain buys equity in top banks
One of the more interesting moves made in recent hours is the decision by the Bank of England to buy preferred stocks in some of the top banks. This is an interesting move that allows the banks capital, while providing the British government with assets that are likely to increase in value. (Perhaps this is something more along the lines of what the U.S. should have done.)
At any rate, no one thing is likely to fix the economic problems plaguing the globe, and a series of actions, taken in the countries with the economic lead, will be needed to halt the crisis.
Tags: Fed rate cut, mortgage interest rates, home mortgage loan, mortgage loan blog,
economy, interest rates, credit cards
