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.