Fed Cuts Rate Half a Point, Now at 1 Percent-Mortgage Rates Head Higher

The Federal Reserve unanimously cut the benchmark rate to 1 percent. This expected, but historically extraordinary rate is one in a long line of efforts to avert a continuing to deteriorate US economy.

The Federal Open Market Committee's (FOMC) unanimous action to day is easily summarized in five short words from the FOMC statement: "...downside risks to growth remain." Citing declines in consumer expeditures and business production, as well as slowing foreign economic activities that dampen US exports--the Federal Reserve expects ongoing restraint in spending and tightening consumer credit.

Fears of inflation seem to be long gone, cast off in the FOMC statement. Likely, a premise reinforced by recent attempts by OPEC to control the steep decline in oil prices and lagging demand.

The Fed announcement has caused a quick rally in late stock market trading, the Dow currently up 245 point. Meanwhile, mortgage rates are radically shifting higher--nearly a 100 basis point bounce in mortgage bonds, translating into nearly 0.25 percent increase in 30 year fixed mortgage rates.