Wednesday, October 31, 2007

Federal Funds Rate Down Again

Today the Federal Reserve once again in less than two months lowered its target rate for the federal funds rate by a modest 25-basis-points to 4.5 percent and the discount rate to 5 percent.

In a statement announcing the Fed’s decision today, members of the Federal Reserve's Open Market Committee said that "after this action, the upside risks to inflation roughly balance the downside risks to growth."

Some analysts concerned that the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.

However, on Martha’s Vineyard, the mortgage market has little effect on our high-end market, because most real estate transactions are all cash.