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Tuesday, March 18, 2008

Personal Finance QuickTake: Uncle Ben's Nice

Uncle Ben's Nice to the market with a 3/4 point reduction in the Federal Rate, down to 2.25%.

This is the sixth cut in the Fed Rate and now at 2.25% reaches a low from 2004.

From the report:

However, there has been opposition inside the Fed to the aggressive moves. The latest rate cut came on an 8-2 vote with two members of the Federal Open Market Committee dissenting. Both Richard Fisher, president of the Dallas regional Fed bank, and Charles Plosser, president of the Philadelphia regional Fed bank, voted against the rate cut, arguing they would have preferred less aggressive action.

In explaining its actions, the Fed said that it was having to navigate a difficult policy environment that included sluggish economic activity and rising inflation pressures. The Fed statement said that "the outlook for economic activity has weakened further" but that "inflation has been elevated" with some signs that expectations of future inflation pressures are rising, a dangerous sign for the Fed.

But the Fed signaled that it stood ready to cut rates further if necessary, saying that "downside risks to growth remain." Bernanke and other Fed officials have said in recent comments that they view the threat of economic weakness as a bigger risk at the moment than inflation given the risks to financial markets.

"Financial markets remain under considerable stress and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters," the Fed said in its statement.

Seems like some of the Fed Governors are getting nervous about the affect on inflation and feeling that the action is getting a bit aggressive, especially since the Stimulus checks are still 6-8 weeks away.

What...Me Worry?

(Photo from AP)


Sharon said...

I'm hoping mortgage rates go down because of this. I would like to refi my mortgage and heloc to a 15 year mortgage. It will save us a huge amount of money, and keep us on track for retirement in 20 years.

RacerX said...

Thats great! Good for you. I want to refinance next year as well.

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