Fed rate lowered to 1.0%; GDP drops by 0.3%
(October 30, 2008) -- The U.S. Commerce Department announced this morning that the nation's Gross Domestic Product dropped by 0.3% for the third quarter of 2008. This comes the day after the Federal Reserve Board met and lowered its key benchmark Federal Funds Rate (the "Fed Rate") to 1.0%, matching the lowest rate used in the emergency response to the attacks of September 11, 2001.
What's more, Bloomberg reported this morning that the Federal Reserve Board Chairman Ben Bernanke may be prepared to lower the Fed Rate all the way to zero if necessary. This comes after the Fed's meeting on October 7th, at which it lowered the Fed Rate by a half a percentage point to 1.5%.
Mortgage interest rates do not directly follow the Fed Rate; they most closely correlate with the yield on the 10-year US Treasury Note. In recent years when the Fed has lowered the Fed Rate, mortgage interest rates have risen nearly every time -- sometimes only for a few days, other times for several weeks. Mortgage interest rates mostly climbed through the month of October, 2008.