Currently, interest rates are now at a historic lows of one percent. Rates have only been this low one other time in the last fifty
years. Even though lowering rates again might have little impact on the economy, rumor has it that the Fed will possibly
lower the rate again when they meet in mid-December.
Fed Chairman Ben Bernanke also said that the United States has been in a recession since Dec of '07 and will more than
likely remain in this state for awhile. Even though the news is really no surprise to anyone, the stock market took
a huge hit upon acknowledgement of this news. Bernanke went on to say that although financial market may continue to heal, the economy
will remain in a slump for a bit longer.
With rate cuts having little effect on housing, Bernanke says that this is due to the biggest downturn of our credit
and financial markets since the Great Depression. Even though the Fed has ordered banks to lower their borrowing costs, banks
still continue to remain hesitant to make loans to future homeowners and businesses.
Rate cuts can only go so far before we are at zero. In addition to cutting rates, the Fed says there are other things they
can do that might help. One of those is buying long term securities on the open market in huge numbers, which might cut
rates on those securities.
A week ago, the Fed stated that it would buy two hundred billion dollars in various consumer debt securities. Then they
came out and said that they would buy five hundred billion dollars in mortgage securities, which are guaranteed by
Fannie Mae and Freddie Mac. Whatever continues to happen, the Fed says that we can be sure of one thing; that they will
continue to try and find ways to loosen the current credit standards, until it begin to work.
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