Friday, February 8, 2008

Additional Fed Rate Cuts in Doubt

Federal Reserve officials cast doubt on further rates cuts due to two recent sharp cuts and increased concerns over inflation. This news comes at a bad time during this earnings seasons when little good news has been seen. Bad earnings, combined with job losses, slow service-sector growth, low consumer confidence, and housing troubles is leading to a very pessimistic outlook.

Without further Fed rates cuts, decreases in mortgage rates, especially 30-year loans, are unlikely. Banks borrow money from the Fed, and if rates at which they borrow aren’t reduced, banks are unlikely to take on further risk and reduce mortgage rates.

What this means is that it is a great time to shop around for mortgage rates. Economists predict there will be an economic slowdown most of 2008. After this, when the economy rebounds, you can expect interest rates and home prices to do so as well.

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