Breaking News Widely Anticipated And Welcomed

The Federal Reserve cut the federal funds rate by 50-basis points today, joining in on a new round of rate cuts made – or to be made – by central banks around the world.

Joining the display of “we’re all in this together,” both Norway and China – the last source of economic strength in the global economy – cut rates.  The Bank of Japan will likely make a rate cut at its meeting this Friday.  The European Central Bank along with the Bank of England will take similar action at their respective meetings on November 6th.

The Fed justified the cut by saying that the pace of the U.S. economic activity had slowed markedly and it expected inflation to moderate due to lower energy and commodity prices.

But cutting the federal funds rates – the interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements – the Fed hopes to stimulate economic activity and build investor and consumer confidence.  As a result, the prime rate has dropped to 4.0% from 4.5% – good news for homeowners with equity lines of credit, second loans and credit card holders whose rates are tied to the prime rate.

Peter Guichard is a senior associate at Bridgeline Capital and a new contributor to San Mateo Real Estate Blog.  He secures financing for residential and commercial real estate transactions.  Peter has a MBA in Finance from the Wharton Business School at the University of Pennsylvania and BS in Chemical Engineering from U.C. Berkeley.

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