Here we go again. The Federal Reserve cut the Fed Rate by 1/2% today and now stands at 3%. Most major banks followed suit this evening and lowered their prime rate to match the Fed. Prime rate is typically 3% above the Fed Rate and is what many Home Equity Lines of Credit are based on.
Typically when the Fed lowers the rate - we see a jump in primary mortgage rates. It didn't happen today but the still have a few days to go with some very important economic news on the horizon. Jobs numbers are due on Friday and if they are not close to the target, we could see some rate fluctuations. The stock market briefly surged on the news but ended up down today. Based on the report - we might be in for some additional cuts to prime at the next Federal Reserve meeting in March or even sooner.
For those really having trouble sleeping - you can read the entire Fed Statement. A couple of key excerpts and my two cents:
The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.
This is what could cut the party short - inflation. If the rate of inflation starts to rise - so will the Prime Rate.
Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
They hope to reduce or eliminate the potential recession. Good news - they will act in a timely manner as needed. This is the verbiage that leads you to believe additional cuts will be made quickly if needed.
The tough part about the market today is that things are changing so quickly. My goal has
always been to be a trusted adviser to my clients. Provide the customer with solid and credible information and everyone wins.
And I should probably stop trying to guess this crazy market. Last week I had a gut feeling that the Feds would not move today - I think it was just the Taco Salad I had for lunch.
The good news is the Outer Banks Real Estate Market has had some increased activity lately. Many Realtors I speak with have noted increased interest and showings of homes. Not sure if the record low rates are causing it or that people are now thinking about their summer vacation and the desire to buy a home at early 2004 prices. If I can be of any assistance, please feel free to contact me.
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