Fed Funds Rate Cut from 1% to 0 - .25%

From FederalReserve.gov - FOMC Statement for December 16, 2008 Meeting - (FOMC press release below in its entirety):

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.

Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.

Wow. Again, the Fed cut the Fed funds target rate from 1% to 0-.25%. I think they said it best over at Calculated Risk - "This is quite a statement ... Fed will hold rates low for an extended period." Things are bad and it looks like they will continue to be so for the foreseeable future.

Fed Cuts Interest Rate by 50 bps

As reported by CNNMoney.com - "Fed cuts rates again":

The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday and expressed continued worries about the damage being done to the economy by the ongoing crisis in the financial and credit markets.

The rate cut put the central bank's federal funds rate at 1%. That matched the lowest level for this overnight bank lending rate ever -- the last time it was at 1% was from June 2003 to June 2004.

Initially, the market is behaving. For some of you out there, your equity line, car loan, and credit card payments just got a touch cheaper yet again!

The Fed Cuts Rates: 1/2 Point!

The Fed, in a globally concerted effort, cuts rates by 50 basis points. The target rate has now been lowered to 1.5%. The rate for the Fed's discount window was lowered 50 basis points as well bringing the rate to 1.75%.

The move was done in coordination with central banks worldwide.

For real estate investors using equity loans and equity lines to finance their real estate investments, your money just got cheaper again. On $100,000.00 investment, you are now paying $500.00 a year less for that money.

Since the Fed's started cutting rates, the rate has been lowered from 5.25% to 1.50%, a 3.75% drop. On $100,000.00 investment, you are now paying $3,750.00 a year less for that money.

With each cut, real estate is becoming more attractive. A home just got cheaper without having to drop the price. Your cash flow just improved even though you, as a real estate investor, are collecting the same rent check.

Fundamentals, fundamentals, fundamentals!