Updated: November 14, 2008
.50 STILL GOING STRONG. Not much change from three days ago when I last posted. The stock market fell again this week with the Nasdaq down 8%. Retail sales numbers were down 2.8% in October and while the number is bad, a large percentage of that drop was the fall in the price of gas. I think we all want gas prices to fall. Overall, this week goes down as the time when the recession really hit main street - Circuit City filed for bankruptcy, BestBuy is huring, JC Penney and others are seeing huge sales declines.
The good news is that the .25% blue line (rate drop to .25%) seems to be receding so some measure of fear appears to have left the market. We'll see what next week brings.
The Fed Funds Rate is a key indicator in determing the savings account rates, money markets rates, and CD rates that banks will pay. If the Fed funds rate goes down, banks usually lower their rates while the opposite is true if the Fed raises rates. While this is generally true we have not seen as strong a correlation lately. I analyzed rate changes over the last year and found that bank savings rates were much less sensitive to Fed Funds rate changes than would be expected. But lately, the banks have begun to cut rates and we are starting to see decreases in cd rates and savings and money market rates. If you have cash you are going to deposit, now might be a good time to lock in a medium-term cd.
The chart is also up for the January meeting:
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Related Articles:
Summer Vacation for the Fed by PhilR - Jun 23, 2007
Weak Retail Sales Could Convince Fed to Cut Rates by PhilR - Sep 15, 2007
Protectionism - 2008-2009 Style by JRodgers - Dec 20, 2008
PIMCOs Bill Gross Sees Federal Funds Rate a 3% by PhilR - Dec 11, 2007
Benny's got Balls by JRodgers - Dec 11, 2007
Fed Rate Cut Could Cause Major Problems by Sam Cass - Sep 05, 2007
Credit Crunch May Prevent Fed from Raising Rates by Sam Cass - Sep 06, 2007.
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