Fed cuts key rate
May 1, 2008
The Federal Reserve as expected cut the fed funds rate by .25% lowering the key rate down to 2%. This translates over to a prime rate of 5%. The move was expected by most economists who recognize that the fed is facing an increasingly difficult task of balancing rates and economic growth.
The fed was non committal on whether they would continue lowering the fed funds rate this year. Despite a struggling real estate market the fed is now faced with record oil prices and must juggle the impact this could have with inflation. Additionaly, the fed is under pressure as the U.S. dollar continues to decline. The economy has been quite resiliant despite the struggles in the housing industry. Mortgage rates typically do not move when the fed cuts the fed funds rate, however yesterday after the announcement their was a slight decline in the bond market which would be good news for mortgage rates and those considering a refinance.
Unemployment rate is now above 5%
April 5, 2008
The nations unemployment rate shot above 5% for the first time since 2003.
For the second month in a row, the job market posted a negative figure, this month a total of 80,000 jobs were lost. The job market is simply another indication that the U.S. economy is in a period of recession. The interesting part of yesterday’s news is that the stock market has already priced in a negative figure and did not have a significant sell off, even with the disappointing news. Many economists are now predicting that the Fed will be forced to cut the Fed funds rate by and additional half percent later in the month. The yield on the ten year bond dropped below 3.5% which is good for long term mortgage rates. The market mentality has shifted from fears of a recession, to acknowledging that the economy is in a recession and simply trying to determine how long it will last. This is good news for individuals looking to refinance their mortgage as you should expect fixed mortgage rates to continue to hover under six percent.
