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Tuesday, January 22, 2008

Personal Finance QuickTake: Fed Cuts Rate 3/4%

Early this morning, in a surprise mood, the Federal Reserve cut the Federal Funds rate by a whopping from 4.25% to 3.5% . A cut was expected at the next meeting, but by doing this they obviously are showing that they feel the economy is headed south ...fast!

The cut is not only surprising due to the timing, but also the size. .75% is an outsized drop at the Fed where the have been making small .25% cuts.

Unfortunately the market took this as further evidence that the economy is in worse shape than though of earlier. The stock market dropped over 450 points at the opening of the day, but bounced back as some tried to lock in lower prices.

What this means to us! It will be very hard for all of these high Interest Rate savings account not to cut the same percent, so it look like 4% is the new 5%! Credit Card Rates should come down a bit, and it may become a good time to refinance your house or debt.

The worst thing to do is panic. You will only lock in losses. Downturns happen and looking at them as potential buying times can secure good returns later.

Remember in budgeting or managing your money it is Buy Low, Sell High...not the other way around!


Catherine Lawson said...

Great advice. Always doing the opposite to what the majority is doing usually works. And most will do exactly the opposite of what you said: Buy low and sell high.

RacerX said...

Not losing your nerve and having the foresight to be a contrarian sometimes is the best way to plan!

Thanks Catherine!

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