The FOMC Cuts Interest Rates Again

The Federal Open Market Committee, the monetary policy arm of the Federal Reserve, held their December meeting Tuesday and lowered both the Fed Funds and Fed Discount rates by 25 basis points each. It was the third such rate cut in succession by the Federal Reserve Board and is designed to continue their efforts to help foster price stability, sustain growth and hopefully ward off the potential for a recession. In addition, the rate cuts should also help with the current foreclosure situation and give another boost to the ailing housing market.

Recent evidence suggests the risk of core inflation continues to improve modestly, oil prices have stopped climbing, at least for the time being, and the declining dollar has leveled off somewhat. While the Fed's main job is to remain vigilant against inflation, these other factors have allowed them the opportunity to again ease their monetary policy.

Stocks sold off and treasuries rallied on the news. Stock trader's wanted a bigger cut of 50 basis points. Bond trader's got what they anticipated. Concerns surrounded the Fed's statement, which appears to be more muted versus its previous statements from the September and October meetings. While the rate cut should help to bolster the economy going forward, the waiting game will begin anew as to what the Fed will do at their next meeting in January.

Metro Mortgage Company is a full service federally regulated Mortgage Banker specializing in originating Conventional, Jumbo and FHA/VA loans. For more information on current interest rates, please contact us at your convenience.  

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