Federal Reserve Cuts Fed Funds Rate to Nearly Zero
Today, the Federal Reserve Board cut the Federal Funds rate to nearly zero. They also announced a series of moves that will potentially drive down mortgage rates.
The U.S. markets responded with a lot of enthusiasm, sending the stock market much higher and driving long-term bond yields down.
If you have equity in your home, you may be able to refinance soon and save money, as mortgage rates will likely plummet below 5%. You may want to pay attention to the national averages posted at sites such as Bankrate.com.
One potential unintended consequence of the low rates is that it may start costing you to have money saved in a money market fund, as the investment management fees in these funds may be higher than the investment income those funds' investments earn. How these negative yields would be accomplished is still unknown, as today's low rates are clearly unprecedented. One potential approach is that your number of shares could be reduced on a monthly basis. To read more about the potential for negative money market yields, click here for an article from Bloomberg.com.
Ultimately, these moves show that the Federal Reserve is committed to do whatever it takes to end the financial crisis. Whether or not these steps are enough to turn the tide is debatable. Stay tuned.
The U.S. markets responded with a lot of enthusiasm, sending the stock market much higher and driving long-term bond yields down.
If you have equity in your home, you may be able to refinance soon and save money, as mortgage rates will likely plummet below 5%. You may want to pay attention to the national averages posted at sites such as Bankrate.com.
One potential unintended consequence of the low rates is that it may start costing you to have money saved in a money market fund, as the investment management fees in these funds may be higher than the investment income those funds' investments earn. How these negative yields would be accomplished is still unknown, as today's low rates are clearly unprecedented. One potential approach is that your number of shares could be reduced on a monthly basis. To read more about the potential for negative money market yields, click here for an article from Bloomberg.com.
Ultimately, these moves show that the Federal Reserve is committed to do whatever it takes to end the financial crisis. Whether or not these steps are enough to turn the tide is debatable. Stay tuned.
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