US Interest rates cut AGAIN
Posted by markharrison on January 30, 2008
Nine days ago, the US Federal reserve cut US interest rates by .75%.
Since then, I’ve been increasingly concerned about it – it DIDN’T feel like a sensible response – it felt like a knee-jerk reaction to stock market problems the day before – It wasn’t at their regular meeting, but at an emergency session of the FOMC (the US equivalent to the Bank of England’s MPC.)
They’ve just announced, at their normal meeting, that they are cutting US interest rates by a further .5%, down from 3.5% to 3.0%.
The rationale, this time round, seems to have been that the US Q4 economic growth figures were lower than expected. This may well be true… but the US Q3 economic growth figures were much HIGHER, so overall the second half of 2007 panned out pretty much on target for them.
While I’ve written before about why it’s a bad idea to second-guess the Bank of England, this has got to increase the pressure on them to move UK interest rates down a little to. Most analysts, and most traders are assuming that the BoE will bring rates down in February (by .25%) and later in the year, probably twice.
Hopefully good news for those UK people who will see their mortgage payments fall. (Variable rate mortgages are far more common here than in the US.)
And very good news for UK investors looking to buy in the States at the moment 
Whether lower base rates will turn into lower fixed-rates, or lower short-term discounted mortgages for UK investors is another question though – while some rates are lower, banks are a lot less willing to lend to anyone even vaguely borderline.
Shailesh said
Mark,
As you highlighted there are major differences between the US and UK markets. The Fed move smacks of fear and panic. They’ve slashed rates by 1.50% over a 8 day period. They haven’t done something this dramatic in a long time. Even through two Iraq Wars, 9/11, two financial bubble created crisis – the Fed never lowered rates this dramatically. It really makes me wonder how bad this recession is going to be. I believe the US is already in one – just because the data isn’t in doesn’t mean people don’t already feel the pain.
Property in Bansko said
Property for Sale in Bulgaria – Bulgarian ski property and Bulgarian coastal properties are purchased at very low prices and is ideal for sun birds and skiers to own that holiday home they have always dreamt of.