| “TAKE TIME TO DELIBERATE; BUT WHEN THE TIME FOR ACTION ARRIVES…STOP THINKING AND GO IN.” Napoleon Bonaparte. And taking action after deliberating was exactly what the Fed did last week, when they cut the Fed Funds Rate by .50%, lowering it to 1.00%.Why did the Fed take action last week, after it had already lowered the Fed Funds Rate by .50% on October 8 in a coordinated effort with other central banks? To continue to help ease the credit crisis, and prevent a long and severe global recession. In fact, several foreign central banks followed the Fed’s lead again last week, with Hong Kong cutting their lending rate by .50%, Taiwan cutting by .25%, and Japan cutting by .20%. This is important because cuts by other nations help stabilize the US Dollar, which typically loses ground after our Fed cuts rates, because of the lower yield offered comparatively offered in the US. Another interesting point to note: since oil is Dollar denominated, the price per barrel typically jumps after our Fed cuts rates, because of the decline in the value of the Dollar. The cuts by other central banks should keep oil…and gas prices, in turn…from skyrocketing again.
Another reason the Fed took action: The Fed’s statement discounted threats of inflation, saying that slowing economic growth should lower inflation pressures over time, but added that downside risks to economic growth remain. And last week’s negative Gross Domestic Product reading is confirmation that things have slowed quite a bit. Although experts have speculated that the US may already be in a recession, the first hardcore signs appeared when the Third Quarter Advance GDP report showed that consumer spending declined at the fastest pace in 28 years. The report also reflected the largest quarterly decline since the end of the last recession in 2001. So what did all of this mean for Bonds and home loan rates last week? After worsening early in the week, Bonds and home loan rates attempted to stabilize by week end. And while it was a treat that Bonds did bounce off an important level of technical support, home loan rates still ended the week nearly .125-.25% worse than where they began. |
Last Week In Review
 |
Brent Blaustein, CMPS Mortgage Consultant Princeton Capital (707) 769-4327 |
November 3rd, 2008 · No Comments
Tags: Brent Blaustein
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.
Leave a Comment