| The Fed is on your side
Since the Fed rate affects how much consumers pay on credit card debt, home equity lines of credit and auto loans, consumers' monthly debt obligations should slide along with the rate cut. For home owners with home equity lines of credit, it shouldn't be long before they see lower monthly loan payments. "That rate will drop three-quarters of a percentage point fairly soon," said Holden Lewis of Bankrate.com. "Probably in about two billing cycles." The Fed's dramatic rate cut - its largest since 1984 - won't do much to help consumers with their credit card debt, however. According to Bill Hardekopf, chief executive of LowCards.com, credit card issuers may choose to lower their annual interest rates by three quarters of a point. However, for a balance of $5,000, that amounts to only $3.13 a month.
Interest rate cut spooks skeptics
The Federal Reserve handed out a second interest rate cut on Halloween, giving markets and borrowers the treat they were expecting. But skeptics questioned whether the quarter-point rate cut aimed at shoring up the housing market would unleash the specter of inflation on a day where gold and oil prices hit new highs. "If they hadn't cut interest rates, it would have been a disaster," said Ashwani Kaul, a senior analyst with Reuters Estimates in New York. Stock investors had priced in a cut, and the absence of one would have spooked markets in a big way, he said. The Dow Jones industrial average rose 137.54, or 1 percent, to 13,930.01, while the Nasdaq composite index rose 42.41, or 1.5 percent, to close at 2,859.12 Wednesday. Consumers should benefit from the Fed action via lower costs on variable-rate credit cards, auto loans and home-equity lines of credit, said Scott Anderson, a senior economist with Wells Fargo in Minneapolis.
Euro Holds Ground as IFO Nixes Rate Cut Speculation- Return of Risk?
At the start of this week rumors of a possible emergency ECB rate cut weighed on the unit. However, tonight’s IFO results put an end to any notion of a near term rate cut from Mr. Trichet and company. For the time being the region’s economy continues to expand at a moderate pace allowing ECB authorities to maintain their hawkish posture. If equity markets continue their recovery into the North American session, the combination of better risk environment and supportive fundamentals should favor further EURUSD gains. In US session traders will keep their eyes peeled on the Existing Home sales which are once again expected to be soft dropping below the psychological 5M unit mark. However, the weekly jobless claims numbers may in fact be of more importance to the state of the US economy. In our opinion labor markets are the dividing line between recession and a mere slowdown in economic activity.
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