The Fed cut the Fed Funds Rate by .75%, lowering it to 3.50%. The Fed decided to hold a special meeting last night as US Stock futures were trading significantly lower and Stocks around the world sold off sharply yesterday and this morning as foreign countries fear a US recession. This morning's Fed cut was the first inter-meeting Fed action since September 17, 2001, and the deepest one day Fed Cut since 1984. In addition to cutting the Federal Funds Rate, the Fed also cut the Discount Rate, the rate member banks can borrow directly from the Federal Reserve, to 4.0%. This move should provide further stimulus to the credit markets. The Fed Funds Futures are still fully pricing in another 50 bpt cut at next week's meeting, which would lower the Fed Funds Rate to 3%. This is interesting with inflation still a concern. This Federal Reserve's emergency rate cut is the most aggressive easing in 23 years and yet failed to curb a global market sell off and a stampede into safe haves assets. Worries about a U.S. led global slowdown triggered heavy equity losses in Asia and Europe over the three-day U.S. holiday weekend. The overseas bleeding weighed heavily on U.S. stocks with the Dow opening down more than 400 points and Nasdaq losing 5% (but regaining some of those losses throughout the day). The deepening financial market turmoil, which stemmed in part from prolonged woes in the U.S. housing and mortgage markets, seems to have forced the Fed to move before next week's scheduled meeting to forestall further damage to the economy. The other change to keep an eye on is pricing on shorter terms mortgage ARMS. In recent history Arms and 30 year mortgages have been so close in pricing that it was not worth the risk. However as the short-term markets rates continue to improve it may be worth shopping ARM rates if you know you home purchase is for under 10 years. | 
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