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Federal Bank Interest Rates Face 0.25% Drop

J. Wu Posted in Money Market Rates by J. Wu
December 9, 2007 08:45 AM - 4 Comments

The FOMC (Federal Open Market Committee) is expected to cut interest rates on December 11, 2007 by 0.25%, effectively lowering the federal funds rate to 4.25%.

According to the futures markets, professional traders are currently 50% confident that rates will be cut by 25 basis points.

Last week, many economists were expecting a 0.50% drop, but because of a stellar report released last Friday indicating that America’s employment rate is healthy, experts are now confident that we will see only a 25 basis point cut.

What does this mean for money market, savings, and CD (certificate of deposit) rates?

Unfortunately, we will continue to see banks cutting their yields all across the board. In the last few months, ever since the federal reserve bank first started cutting interest rates, we have seen an average decline of 0.37% in liquid money market & savings account rates and a decline of 0.31% in CD accounts.

What does this mean for mortgage rates?

According to mortgage calculators, rates for home loans are at their lowest in 6 months. This is a great relief for homeowners who are still on ARMs, and we will probably be seeing an increase in refinancing in the months to come.

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Comments (4)
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  1. Rob Lowe said:
    on December 10th at 09:28 am

    I’m interested in others opinions about whether there is the basis for a massive lawsuit against major US banks and SIVs that created the current financial crises which has resulted in significant loses for for Americans living abroad and on fixed incomes. The charge: Financial Terrorism and the de-stabilization of the the US and Global financial markets. The damages: By forcing the Feds repeated cuts in interest rates, US citizens living on fixed incomes and US citizens abroad who are effected by exchange rates have suffered significant loses of income and a reduction in their standard of living.
    Any opinions?

  2. Steve Weinberg said:
    on December 10th at 06:46 pm

    I used to work as a bond trader for Goldman Sachs (retired), and I would recommend locking in mid to longterm CD rates before the FOMC decision.

    I am 100% sure we will see a 25bp interest rate cut, and this is what the market and all the banks expect. Deposit rates will only continue to fall for the next few 2 or 3 fed meetings.

  3. Curls said:
    on December 13th at 06:18 am

    Rob Lowe -

    How about stop blaming US for being less than perfect. You’ve been listening to the overseas rhetoric too long that says attack the US “It’s too strong and too arrogant”, with no compassion that it’s as imperfect as every other country out there and we know it. They just don’t know that we know it. Spreading hate against your country (yah the word terrorism isn’t hateful in this context, when it’s this overblown?), it’s going to fix what’s wrong. And you certainly know what’s wrong has deeper roots in all the global shifts our country isn’t weathering grandly - not just US Bank policies on housing morgtages.

    Your facing sadly one of the risks of overseas employment. Risks can’t be sued for. I’m sorry for your losses and frustration.

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