Analysts are predicting that the Federal Reserve will cut key interest rates when it meets Jan. 29-30.
Such a rate cut — while not directly tied to mortgage rates — does predict their levels. A key rate cut generally means mortgage rates will decline.
Recently released employment numbers “are clear evidence that the economy is beginning to slow,” says John Canavan, market analyst at Stone & McCarthy, “and that the housing weakness and credit-market woes are starting to take a bite. At this point, there’s no question that the Fed will have to ease again.”
The question is how much of a cut. Some observers say a half percentage point is likely to help offset the negative fallout from the subprime mortgage market and weaker job growth.
Other analysts say consumer spending is high and exports are rising. They predict a quarter percentage point decrease.
Source: The Wall Street Journal, Deborah Lynn Blumberg (01/07/08)
