In a dramatic move, the day after a 1/4 point rate cut, the Fed has announced a plan to inject liquidity into the credit markets which have been in very slow thaw since August. The Fed, The European Central Bank, Bank of England, and the Swiss National Bank have hatched a plan to make $40 Billion Dollars available this month in short term (1 month) loans to banks. The Fed will do this by auctioning these loans twice a month for the foreseeable future. While most don't understand the mechanics of the deal, the idea is to stimulate banks to lend and to make short term funds available for them to do so. Fed officials deny that the unveiling of the plan had anything to do with the negative reaction and disappointment of yesterday's move to lower rates by only 1/4 of a point.
The quick read here for NY Real Estate investors- this move may have some impact in keeping the national economy from slipping into recession in 2008. A stronger national economy would be beneficial to the stock market and reduce potential job losses in our local economy. Yesterday's move will keep pressure on the dollar, keeping our market cheap for foreign investment and of course, lower rates are almost always a plus for real estate. Will the number of moves by the Fed have a tangible impact? Time will tell.
Fed Joins Other Banks To Add Cash (NY Times)