Fed Meeting

Some of you may or may not know that the Federal Reserve Board and in particular Ben Bernanke and his colleagues are meeting December 11th to decide whether or not they should reduce the discount rate and the federal funds rate. It was rumored that they could reduce the discount rate prior to this meeting should the lending guidelines remain tight. The discount rate or the rate at which banks lend money to each other is a key component in market liquidity. The federal funds rate or the rate at which banks can borrower money directly from the Federal Government is also a critical "safe guard" to keep liquidity in the economy. I have spoken about these indicators in previous blogs however thought I would remind everyone that on December 11, 2007 we could see additional cuts should economic data; such as home sales, unemployment filings, job growth, oil and inflation remain unchanged or stagnant.

Ben Bernanke has said numerous times that they are willing to do everything necessary to keep the economy from a recession, however warn that they will closely monitor inflation although that indicator has taken a close "back seat" to the broader problem of market liquidity, the "mortgage meltdown" and slumping housing sales. I must say that I feel more comfortable about the market place, housing data and the governments response than I did 90 days ago. Hopefully we will continue to see the necessary changes from the government, servicing companies and banks to help the economy crawl out of this hole.

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