The Recession Cometh

The US Federal Reserve has just cut the funds rate by another half a percent; that's just 8 days after it's last 0.75% cut, and the fifth rate cut in the past four months. It was also signalled that further rate cuts are possible.


What's a rate cut? It bascially means the Federal Reserve brings down their lending rate, which in turn affects banks and financial institutions lending rates, making it cheaper for companies, investors and individuals to borrow money. This in turn is supposed to stimulate the economy. More rate cuts means the Fed believe the economy is slowing, and five cuts within four months means, yep, recession is on the way.

That's pretty much confirmed then; the US is facing a recession, and whether you want to listen to the pretty mild announcements telling people that everything is fine, you have to admit, the situation is pretty screwed. The current administration is also negotiating a stimulus package of $150 billion to spur investment. Inflation rates have jumped up in the last 3 months of 2007, unemployment rates have increased, and economic growth is at it's lowest point in 5 years, when the US was struggling to recover from the 2001 recession.

What does that mean for you? Well, if you're thinking of getting a loan, now is the time. But whether you do or not, the ripple effect is on it's way guys, get ready.