Fed Half-Point Rate Cut

The Federal Reserve Tuesday sliced one-half a percentage point off the federal funds rate, cutting it to 4.75 percent from 5.25 percent.
It also cut its discount rate by the same amount, also bringing it to 5.25 percent.
The cuts could be a mixed blessing for homebuyers, pushing fixed-rate mortgages higher if inflation worries grow, economists say.
But relief could come in other ways. Consumers should start feeling the impact quickly in the form of reduced payments on home-equity lines of credit, credit cards and some car loans.
There is likely to be little immediate relief for borrowers with many adjustable-rate mortgages because the rates on roughly half of these loans are tied to the London interbank offered rate (LIBOR). Libor recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets.
"If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.
Source: The Wall Street Journal, Jane J. Kim and Ruth Simon