The Federal Open Market Committee concluded their meeting today by announcing that the new target for the Fed Funds rate will be between 0 and .25%. The Fed now has very little ammunition left to correct monetary policy through future Fed-Fund rate cuts.

As expected, Fed Chief Bernanke announced that economic conditions had “weakened further,” and that since “inflationary pressures have diminished appreciably,” the central bank was able to use most of the little ammo they had left.

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When it comes to the stock market, investors have been walking on egg shells, cautiously anticipating how to play the volatile ups and downs that come with every new economic or business report, government initiative, or speculative action. For that very reason, the Federal Open Market Committee meeting that’s set to wrap up today at 2:15p.m., may result in a rate cut anywhere from a half to a full percentage point (any cut less than a half of a percentage point has already been forecast as a major disappointment) in order to keep up with the market’s expectation.

Yet, there are some strong arguments that suggest a rate cut would not bring the desired boost to the market that many have anticipated. Some investors have attributed yesterday’s 11% boost to the anticipation of a Fed rate cut — that positive sentiment may no longer persist. Also, investors are quick to the idea that a trimming of Fed Funds rate (already at a low 1.5%) means little impact on consumers: Read the rest of this entry »

Ask yourself this: “What is the benefit of a more sizable rate cut in this current environment?” asked HSH Vice President Keith Gumbinger. Within the last couple of weeks the Fed has implemented several programs to jump start the natural flow of things, including an emergency rate cut. We think that the Fed needs to give their programs more time to work before they use up the last of their little-remaining ammunition to battle market conditions.

The Federal Open Market Committee began a meeting today that carries over into tomorrow when Fed officials in charge of setting monetary policy will decide whether or not to trim the already slim Fed Funds rate.

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It’s taken a while to digest the implications of yesterday’s surprise Fed Reserve rate cut, but I think you’ll agree that the new article was worth the wait. (And of course there’s an updated graph for your edification.) Some of it is a bit technical (and we have readers who like that), so here’s the bottom line:

Good credit quality ‘conforming’ borrowers now shopping for variable-rate products tied to short-term indicators will generally find credit conditions to be mostly stable at the moment. Lenders are aggressively seeking new business from solid borrowers with strong equity positions, so rates and fees may actually be improving for certain equity seekers. Borrowers with non-conforming credit needs will probably continue to find a challenging credit environment, and should be prepared to shop aggressively to find a suitable loan.

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As we mentioned in our previous post, the cutting of the Fed Funds rate will have little to no effect on mortgage rates. Rather, the Fed Funds rate will affect consumers with variable rate products. As Mary Pilon of the Wall Street Journal wrote, “consumers should take advantage of the rate cut to accelerate efforts to pay down debt and save:”

The Fed funds rate mainly impacts two major things for consumers: variable interest rates (like those on credit cards) and home equity lines of credit. The prime rate, which is a term usually buried in the fine print of your statements as the amount of interest you might pay, can be impacted. Basically, a big question this time around is whether consumers will take advantage of the low rate to pay off debts or not.

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The Federal Reserve cut its target for the Federal Funds rate to 1.50% this morning. The between-meeting move wasn’t entirely unexpected, but it came as part of a coordinated campaign to ease monetary policy:

The world’s major central banks moved in concert Wednesday to slash key interest rates, easing monetary policy around the globe in an ongoing struggle to head off financial turmoil that has threatened to flatten the international economy.
The coordinated rate moves saw the Fed cut its key lending rate by half a percentage point, to 1.5%.

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The ongoing financial mess has a lot of visitors asking us for more information on short-term rates.
Thus, we’re pleased to introduce this chart of indicators including daily conforming mortgage rates, Treasuries, Fed Funds, overnight Libor, and even Fannie Mae/Freddie Mac required net yields (basically, the ‘wholesale’ price of mortgage money).

Let us know what you think!

Market expectations for the finale of today’s Federal Open Market Committee meeting are that the Federal Funds rate will be cut by 0.25%, lowering it to 2%. The question on everyone’s mind remains: “Will this be the last rate cut of the cycle?” If the result of today’s meeting is different from market expectations, the economic effect could be damaging. The market must be given a chance to prepare for Fed activity.

HSH Vice President Keith Gumbinger believes, “Absent a tremendous new emergency the Fed is done cutting rates. However, within the past six months we’ve had several emergencies, so there remains a chance that rates could be lowered yet.”

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As expected the Fed cut the Federal Funds rate this afternoon by 0.25% to land at 2%. Click here for the analysis of today’s meeting.