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Wednesday, January 23, 2008

US Federal Reserve Cuts Interest Rates

The Federal Reserve cut interest rates yesterday by 75 basis points to 3.5%. This was in response to the deterioration in the US economy and the prospect of recession.

It was expected that a rate cut may occur on the 30th January but it would seem that a cut could not wait until then. This was the largest single cut since 1982 and the first that was unplanned since 2001.

Economic conditions in the US have continued to weaken and it is hoped that a rate cut of the size will try and kick start the situation.

The cut in interest rates in the US will now shift the emphasis onto the Bank of England to make further cuts. There are expectations of further cuts in the US on the 30/01/08.

Our view is that given the sudden decision by US Federal Reserve to cut rates to 3.5%, it is sure extremely likely that the UK will follow suit. As no rate cut was made in January, a rate cut in February is now highly likely, with some predicting as much as half a percentage point.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260.