Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of YourPropertyExpert.com

US Interest Rates cut by 3/4%

Posted by markharrison on January 22, 2008

Well, it’s only ever happened twice before, and one of those was immediately after 9/11… but the US Federal Reserve (the American equivalent of our Bank of England) have just cut interest rates by 3/4 of a percent.

The US economy is deeply into recession, and the hope is that this will kick-start spending again (and make houses look more affordable.)

When someone like the US cuts its rates, that means that typically big investors move money OUT of dollars, and into other currencies like the pound, because they can earn higher rates in pounds than dollars. When that happens, the pound gets stronger against the US dollar.

  • Good news for British consumers wanting to buy US products (new Apple Mac Air, anyone?).
  • Bad news for British exporters trying to sell into the US market.

The Bank of England was already widely tipped to reduce UK interest rates in February, (but see my article here about why it’s a bad idea to try to pre-judge what the BoE will do.)

I suspect this makes it even more likely that we’ll see a UK rate cut.

Good for the housing market, again, better for those with variable-rate mortgages.

The big question, though is “will the US move actually solve the problem the Fed want it to”…

… and on that, who knows? But Deek over on Twitter has a great video about the issue here

6 Responses to “US Interest Rates cut by 3/4%”

  1. Erin said

    The interest rate cute might kickstart spending, but I think a turnaround is still a long ways away.

  2. […] rates… (What that means, and why it’s not good news.)Top Ten Tax Deductions for Property InvestorsUS Interest Rates cut by 3/4%The SubPrime crisis – as explained by Bird and FortuneUS Mortgage Scams double, as reported by the […]

  3. gurp said

    Well the Canadian dollar just went up and now it is trading almost even with the american dollar. The american economy will take approx 4 more years to get back to where it was before 9-11. All bush could do was cut interest rates after 9-11 and now the economy is paying the price for a quick fix. The canadian economy will take a big hit soon (July 2008-today) since the forest industry in BC is slowing drying (weak US trading dollar) and the auto industry is dieing all over. Canada makes approx 3 million cars a year and that number will be cut down by 1/3 in 3 years. The housing market in Canada is the only thing that is surviving but that will soon fall as well. I wish Canada suffers the most since they didnt send any troops to fight for freedom and because Canadians are so lame and cant win at any sport.

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