Fed Drop Rates 3/4 Point-What does this Mean?

WASHINGTON (MarketWatch) -- Hoping to halt a market meltdown and prevent a recession, the Federal Reserve lowered its overnight lending rate by three quarters of a percentage point to 3.50% on Tuesday in a rare move between formal meetings.
The 75 basis-point surprise cut came after global financial markets sold off in dramatic fashion on Monday on fears that bad bets in credit markets could spread further and drive the U.S. economy into recession. .
"The committee took this action in view of a weakening economic outlook and increasing downside risks to growth," the Federal Open Market Committee said in a statement.
The Fed also lowered its discount rate by 75 basis points to 4%.
It was the largest cut in the federal funds rate since 1982, after the FOMC had driven rates to 20% to kill inflation.
U.S. stocks opened with huge losses. At mid-day, the Dow Jones Industrial Average was down about 150 points, or more than 1%. Treasurys rallied.
"This move is not an instant fix," wrote Ian Shepherdson, chief U.S.
economist for High Frequency Economics. "The economy is still staring recession in the face, but at least the Fed now gets it."
By cutting rates now instead of waiting a week, the FOMC showed that it's much more concerned about the financial markets and the economy slipping into recession than it was just a month ago, when the committee cuts its target for the federal funds rate by a quarter percentage point to 4.25%.
Over time, rate cuts should stimulate economic growth by making it cheaper to borrow money for consumption or investment. Banks typically lower their prime lending rate for their best customers in lockstep with the Fed. Many consumer and business loans, however, are based on interest rates set in competitive markets, which may or may not follow the Fed's lead.
The Fed has now lowered interest rates by 1.75 percentage points since Sept. 18.

For more on what this means, and how it affects our real estate industry, read HERE.

Fed to Cut Rates Again!!

“We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks,” says Fed Chairman Ben Bernanke just 2 hours ago in a prepared statement.

(courtesy of the Associated Press)

Pledging to slash interest rates yet again to prevent housing and credit problems from plunging the country into a recession, the Fed Chief made clear the central bank was prepared to act aggressively to rescue a weakening economy. The above statement is a bold one that flies in the face of recent criticism that Bernanke has not acted more aggressively to deal with the economy's problems.

Some economists believe the Fed will slice its key interest rate by a half percentage point when the Fed meets next on Jan. 29 and 30. Others, however, think the Fed will go with a more modest one-quarter percentage point reduction, given concerns that high energy prices could spark inflation.

Federal actions over the course of 2007 have resulted in 3 lowered key rates, including its last cut, on Dec. 11, which left the rate at 4.25 percent, a two-year low.

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