Wednesday, October 31, 2007

Fed Cuts Rates

In a widely expected and anticpated move, the Fed lowered short term interest rates by a 1/4 point today, to 4.50%. This is the Fed's second rate cut in 2 months. In the accompanying statement, Bernanke warned investors not to expect further cuts. He believes the risk of the housing slowdown causing a recession is about equal to the risk of inflation. It seems Bernanke intends to leave things alone for a while.

Fed rate cuts usually take a good deal of time to trickle down the the housing market, if they affect it at all. But the Fed's moves are all-important to the psychology of the marketplace, affecting consumers' moods as much as anything else.