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Gloomberg: " Bernanke May Cut Benchmark Rate By Most Since Volcker"

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

Bernanke May Cut Benchmark Rate by Most Since Volcker (Update2)
By Steve Matthews
March 18 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be readying the deepest interest-rate cut in a generation as the central bank struggles to prevent a meltdown in financial markets and a recession.
Traders predict the Federal Open Market Committee, meeting today in Washington, will lower the overnight lending rate by a full percentage point or more, based on futures prices in Chicago. That would be the biggest reduction since 1984, when Paul Volcker led the central bank, and would bring the benchmark rate down to 2 percent.
The Fed took emergency steps over the weekend to stave off a financial panic, lowering its rate on direct loans to banks and becoming lender of last resort for Wall Street's biggest dealers in government bonds..../

Brown says we will miss the worst of the global meltdown as the miracle economy has been run prudently. With inflation taking off Merv is well placed to begin a series of hikes to cool things down. Yeah---right.

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Seriously, what in ******'s name is going on in Bernanke's head? Is he, or anyone else at the Fed, actually taking their job seriously any more?

Edited by Sir Talbot Avenger

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Heard on BBC this morning that some people are talking about possible zero interest rates, like there was in Japan. Absolute madness.

Yep, on the opening snippits of the 8 am news, when they were waiting for the FSTE to show up. A reporter mentioned the possiblity of zero interest rates and quoted "free money !". The people do no realise there is a dislocation between BoE rates and their own borrowing rates. It doesn't help with BBC reporters broadcasting "free money". FFS !

Edited by Harold Bishop

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Brown says we will miss the worst of the global meltdown as the miracle economy has been run prudently. With inflation taking off Merv is well placed to begin a series of hikes to cool things down. Yeah---right.

Yeah, I believe it so much I am about to go out this morning and fix 50K of my STR fund for 12 months. I cannot see IRs going up this year at all now.

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The more Ben cuts the higher the IR:

http://finance.yahoo.com/banking-budgeting.../Mixed-Messages

.../

"Conforming mortgage rates are a full percentage point higher than they should be given how low the yield on Treasurys is right now," McBride said, noting that the yield on 10-year Treasurys is at 3.4% while a 30-year fixed [conforming mortgage loan] is averaging 6.25%.
That's a 2.8 percentage-point spread, far wider than the average spread of 1.8 percentage points for the past decade
, McBride said.
"The excessive spread is a function of the credit crunch, and
Fed interest-rate cuts have proven to be very ineffective at resolving the credit crunch," he said
.
"Rates are higher than they ought to be, and that's no help to the housing market. It's also no help to borrowers in high-cost markets where the conforming loan limits have recently been increased," McBride said.
"When mortgage rates fell really sharply in January, jumbo borrowers were on the outside looking in, because this [rate spread] problem has been persistent on jumbo loans for seven months. But now that it's cropped up in conforming loans, at the same time a lot of jumbo borrowers can now borrow at conforming rates, it doesn't help their situation," McBride said.
A 'floor' on credit-card rates ahead?
Every time the Fed cuts rates, savers get hammered as yields on savings instruments drop
. "The Fed is not doing savers any favors," McBride said. "Not only have interest rates fallen significantly, which cuts the interest income of savers and retirees, but the brewing inflation pressures further rob the consumer of buying power. Each interest rate cut only adds to those inflation worries," he said, noting that rate cuts devalue the dollar, which raises the price of imported goods as well as commodities priced in dollars, such as oil and gold.

The more he cuts the less people are willing to save and the less money that goes back in to the banking system to restore the credit markets. Ben mate--why can't you get it?????

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Heard on BBC this morning that some people are talking about possible zero interest rates, like there was in Japan. Absolute madness.

3-month treasuries are already one percent, which implies thats what the market wants (Fed is having trouble keeping up with treasuries without panicking) Thing is at 1% some money market funds investing in treasuries have no or negative yield when fees are subtracted. :ph34r:

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The more Ben cuts the higher the IR:

http://finance.yahoo.com/banking-budgeting.../Mixed-Messages

.../

"Conforming mortgage rates are a full percentage point higher than they should be given how low the yield on Treasurys is right now," McBride said, noting that the yield on 10-year Treasurys is at 3.4% while a 30-year fixed [conforming mortgage loan] is averaging 6.25%.
That's a 2.8 percentage-point spread, far wider than the average spread of 1.8 percentage points for the past decade
, McBride said.
"The excessive spread is a function of the credit crunch, and
Fed interest-rate cuts have proven to be very ineffective at resolving the credit crunch," he said
.
"Rates are higher than they ought to be, and that's no help to the housing market. It's also no help to borrowers in high-cost markets where the conforming loan limits have recently been increased," McBride said.
"When mortgage rates fell really sharply in January, jumbo borrowers were on the outside looking in, because this [rate spread] problem has been persistent on jumbo loans for seven months. But now that it's cropped up in conforming loans, at the same time a lot of jumbo borrowers can now borrow at conforming rates, it doesn't help their situation," McBride said.
A 'floor' on credit-card rates ahead?
Every time the Fed cuts rates, savers get hammered as yields on savings instruments drop
. "The Fed is not doing savers any favors," McBride said. "Not only have interest rates fallen significantly, which cuts the interest income of savers and retirees, but the brewing inflation pressures further rob the consumer of buying power. Each interest rate cut only adds to those inflation worries," he said, noting that rate cuts devalue the dollar, which raises the price of imported goods as well as commodities priced in dollars, such as oil and gold.

The more he cuts the less people are willing to save and the less money that goes back in to the banking system to restore the credit markets. Ben mate--why can't you get it?????

Your right, no money will be going back into the deposit accounts in the banking system. With real inflation running at between 7-11%, a savings account giving you even 4% growth will get you a negative return. Bonds are financial suicide now.

The other reason money wont go back into the system is because inflation and debt repayments will be and are so high that no one will have too much left over to save anyway, even if they wanted to.

However the banks will still have plenty of money to lend the consumer. This will be more "counterfeit or monopoly money" printed by "Helicopter Ben", so alas, all is well,all that paper money will cause benign inflation,lol, and everything will be fine.

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  • 297 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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