The Fed lowered the Fed Funds Rate by 0.50% yesterday. A rate decrease was expected by most market participants, but the 50 basis points movement seemed to catch some players off-guard.
Mortgage rates dipped in the wake of the announcement, but the real winners are homeowners with balances on their home equity lines of credit and holders of credit card debt.
Each saw their respective borrowing rates drop 0.50% yesterday because the interest rates for HELOCs and credit cards are based on Prime Rate.
Prime Rate moves in lock-step with the Fed Funds Rate.
In the statement above — as explained by The Wall Street Journal — the Fed expressed concern about a broader economic slump and the half-point reduction is attempting to prevent it from worsening.
Source
Parsing the Fed Statement
The Wall Street Journal Online
September 18, 2007
http://online.wsj.com/mdcapp/public/page/2_3024-info_fedparse_shell.html
