As reported in the Globe and Mail this afternoon, the U.S. Federal Reserve Board slashed interest rates by three-quarters of a percentage point Tuesday and left the door open to more cuts, moving aggressively to stem a financial market meltdown and avert an economic recession.
Under the watch of Chairman Ben Bernanke, the Federal Open Market Committee voted at its scheduled meeting to bring the benchmark U.S. federal funds lending rate down to 2.25 per cent. The Fed's decision was not unanimous, with two of 10 policy makers dissenting in favour of “less aggressive action.”
In the statement accompanying the decision, the Fed said that the outlook for economic activity has weakened further, consumer spending has slowed and labour markets have softened. “Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.”
The central bank also noted that although it expects inflation to moderate in the coming quarters, uncertainty over the outlook for inflation has increased.
“Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity,” the Fed said. “However, downside risks to growth remain.”
Charmaine Buskas, a senior economic strategist with TD Securities, said the tone of the Fed's statement points to further rate cuts, with the central bank noting that it will “act in a timely manner as needed to promote sustainable economic growth” and price stability.
“Given that credit markets remain in a fundamental paralysis, and the economy continues to unwind, we are of the view that the Fed will remain in an easing cycle for the next few meetings,” Ms. Buskas said. “The key issue is to first unclog the credit markets and get the wheels turning again.”
Ian Shepherdson, the chief U.S. economist at High Frequency Economics, said that by April 30 Mr. Bernanke should be able to extract another 50-basis-point cut from his more reluctant colleagues. “This will all make no difference to the near-term data, but it is a necessary precondition for recovery, eventually.”
Tuesday's cut is the sixth time in as many months that the U.S. central bank has lowered the federal funds rate, which is now at its lowest level since December, 2004. The rate was 5.25 per cent in August, when the troubles with U.S. subprime loans first escalated and began spreading to capital markets and the wider economy.
Although Tuesday's 75-basis point reduction is large by historical standards, it is bound to disappoint some investors. The Fed also eased rates by 75 basis points at an inter-meeting move two months ago.
Fed-funds futures had priced in a full percentage-point cut after this weekend's stunning near-collapse of investment bank Bear Stearns Cos. Inc. sent shockwaves through markets.
Stock markets in both Canada and the U.S. pared gains immediately after the Fed announcement, although both recovered in the final hour of Tuesday's trading session.
Global credit jitters escalated this past weekend when JPMorgan Chase & Co. agreed to step in to buy Bear Stearns for just $2 (U.S.) a share after the Fed said it would backstop the deal. The central bank announced that it would provide funds to any other troubled investment dealers for the first time since the Great Depression, moving away from its traditional policy of only lending to large commercial banks.
Over the weekend, the Fed also made an emergency quarter-point cut to its discount rate to 3.25 per cent.
Mr. Bernanke has been pulling out all of the stops, taking new and extreme steps in his efforts to ease the credit crunch, set financial institutions on a more stable footing and calm financial and stock markets. Fears that the Bear Stearns situation could trigger similar meltdowns at other financial companies sent Canada's equity market into a tailspin on Monday.
Bank of Canada Governor Mark Carney has said that while he is monitoring the situation, Canada's monetary policy will be driven by domestic conditions, not by panic in global financial markets or external credit problems.
The central bank lowered Canada's rates by a half-point to 3.5 per cent on March 4, citing a weaker-than-expected U.S. economy. According to a spokesman, the last time in modern history that the Bank of Canada slashed rates by 75 basis points was on Oct. 23, 2001.
Warmly,
Mary Wozny
Tuesday, March 18, 2008
Tuesday, March 11, 2008
Central Banks Move To Ease Credit Crunch
According to reports in Toronto's Globe and Mail today, the Bank of Canada joined forces with U.S. and European central banks Tuesday, injecting markets with billions of additional liquidity relief in a continued and co-ordinated bid to ease a global credit shortage.
Just before equity markets opened in North America, Canada's central bank said it will inject $4-billion worth of liquidity into the markets in two parts through its Special Purchase and Resale Agreements. The first injection, worth $2-billion, will be made on March 20 with the securities set to be sold back on April 17, while the second is scheduled for April 3, to be paid back on May 1st.
The central bank said the 28-day purchases, which mirror moves it made in December, are “part of its continuing provision of liquidity in support of the efficient functioning of financial markets.”
Canada's central bank co-ordinated Tuesday's action with the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss central bank. The synchronized global bank action is an effort to provide help in a global credit crises that threatens to push the U.S. economy into its first recession since 2001 if it hasn't already.
The Federal Reserve said Tuesday it will make up to $200-billion (U.S.) in cash available to cash-strapped financial institutions, also for 28 days as opposed to overnight.
“Pressures in some of these markets have recently increased again,” the Fed said in a statement. “We all continue to work together and will take appropriate steps to address those liquidity pressures.”
Just before equity markets opened in North America, Canada's central bank said it will inject $4-billion worth of liquidity into the markets in two parts through its Special Purchase and Resale Agreements. The first injection, worth $2-billion, will be made on March 20 with the securities set to be sold back on April 17, while the second is scheduled for April 3, to be paid back on May 1st.
The central bank said the 28-day purchases, which mirror moves it made in December, are “part of its continuing provision of liquidity in support of the efficient functioning of financial markets.”
Canada's central bank co-ordinated Tuesday's action with the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss central bank. The synchronized global bank action is an effort to provide help in a global credit crises that threatens to push the U.S. economy into its first recession since 2001 if it hasn't already.
The Federal Reserve said Tuesday it will make up to $200-billion (U.S.) in cash available to cash-strapped financial institutions, also for 28 days as opposed to overnight.
“Pressures in some of these markets have recently increased again,” the Fed said in a statement. “We all continue to work together and will take appropriate steps to address those liquidity pressures.”
Sunday, March 9, 2008
Divorce and Your Credit
With the record high divorce rates in Canada and the United States, one should ask themselves how will a divorce impact my credit report?
A divorce decree alone will have no impact on jointly held accounts that are a part of your credit report. For joint accounts, including credit cards, car loans, home mortgages and lines of credit, you and your ex-spouse continue to have joint liability. You are both responsible, and if one of you defaults, creditors will seek payment from the other.
Just because your divorce may be finalized and you think that "finally it's all over!" the reality is that if you were a co-signer on anything with your previous spouse then you are still liable for these debts. Failure on the part of either party to make payments on time and/or pay off these debts will result in your own personal credit being potentially ruined! Often this happens and you are not even aware of it!
Check your own personal credit and FICO/Beacon Score to avoid these surprises before it's too late.
In Canada, you may check your credit online using the link to Trans Union at www.MaryWozny.com.
A divorce decree alone will have no impact on jointly held accounts that are a part of your credit report. For joint accounts, including credit cards, car loans, home mortgages and lines of credit, you and your ex-spouse continue to have joint liability. You are both responsible, and if one of you defaults, creditors will seek payment from the other.
Just because your divorce may be finalized and you think that "finally it's all over!" the reality is that if you were a co-signer on anything with your previous spouse then you are still liable for these debts. Failure on the part of either party to make payments on time and/or pay off these debts will result in your own personal credit being potentially ruined! Often this happens and you are not even aware of it!
Check your own personal credit and FICO/Beacon Score to avoid these surprises before it's too late.
In Canada, you may check your credit online using the link to Trans Union at www.MaryWozny.com.
Thursday, March 6, 2008
Bank of Canada Lowers Prime Rates!
In a widely anticipated move, the Bank of Canada reduced its' Prime lending rate by 50 Bps in response to the recent signs of weakening economic conditions and following extremely weak economic figures for the fourth quarter of 2007.
With overwhelming evidence of deteriorating economic conditions in the United States, Canada cannot escape the fallout from the U.S. economic slump which has been a large contributor to the strenthening in the Canadian dollar and has led to weaker demand for Canadian exports. The Bank of Canada noted that "the deterioration in the economic and financial conditions in the United States can be expected to have significant spillover effects on the global economy".
Fortunately for Canadians, inflation in Canada is under control, thus providing the monetary authority the flexibility to lower rates now, with an anticpation of more rate cuts to come. This should help the Canadian economy weather the headwinds and fallout coming from the United States.
To take advantage of the lower rates and an alternate strategy to save you money on your mortgage costs today, contact Mary Wozny at 705-446-9791, email mwozny@mortgagealliance.com, or apply online today at www.MaryWozny.com.
With overwhelming evidence of deteriorating economic conditions in the United States, Canada cannot escape the fallout from the U.S. economic slump which has been a large contributor to the strenthening in the Canadian dollar and has led to weaker demand for Canadian exports. The Bank of Canada noted that "the deterioration in the economic and financial conditions in the United States can be expected to have significant spillover effects on the global economy".
Fortunately for Canadians, inflation in Canada is under control, thus providing the monetary authority the flexibility to lower rates now, with an anticpation of more rate cuts to come. This should help the Canadian economy weather the headwinds and fallout coming from the United States.
To take advantage of the lower rates and an alternate strategy to save you money on your mortgage costs today, contact Mary Wozny at 705-446-9791, email mwozny@mortgagealliance.com, or apply online today at www.MaryWozny.com.
Saturday, March 1, 2008
Women Homebuyers Today
Savvy single women appear to be buying homes more frequently and at a younger age than ever before, and that has turned the industry's attention to this potentially lucrative consumer group in the softening residential real estate market.
Women are more likely to attend university and more willing to leave the parental nest than their male counterparts. According to new data, 37 percent of single women who have never been married now own their own home.
A desire for financial security, their gowing clout in the workplace and a desire to strike out on their own is helping drive this trend, which is showing significant year-over-year growth. Some researches believe that this is a revolution that will likely change the face of Canadian housing, with the average age of the first time women buyer at 29.
Women buying homes are also showing a marked interest in buying the "fixer-upper" home and becoming proficient in dealing with renovation centres.
To deal with a professional empathetic to the specific needs of women today and to access our Right Mortgage for Women, visit www.MaryWozny.com today.
Women are more likely to attend university and more willing to leave the parental nest than their male counterparts. According to new data, 37 percent of single women who have never been married now own their own home.
A desire for financial security, their gowing clout in the workplace and a desire to strike out on their own is helping drive this trend, which is showing significant year-over-year growth. Some researches believe that this is a revolution that will likely change the face of Canadian housing, with the average age of the first time women buyer at 29.
Women buying homes are also showing a marked interest in buying the "fixer-upper" home and becoming proficient in dealing with renovation centres.
To deal with a professional empathetic to the specific needs of women today and to access our Right Mortgage for Women, visit www.MaryWozny.com today.
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