On the heels of a huge sell off of financial stocks on Monday, the Fed made a surprise announcement to increase the length of time banks can use funds through the "Fed Window". Keeping things simple, banks have longer to "pay back" the Fed on borrowed funds. This should help banks increase the amount of money available for loans with less risk to their shareholders. The Dow Jones Average was up over 400 points on Tuesday as a result.
People have been afraid to make big ticket purchases in times of uncertainty. Consumer confidence will need to be restored in order to begin to get America spending again. There is a Fed Meeting March 18, and there are signs that point to yet another rate decrease. If you are rate watching, next Tuesday and Wednesday are key dates for price changes.
Depending on the expectations of the market place, you may find a decrease on one of those days. Typically, the market will "price in" expected decrease the day before a Fed meeting. If the expected decrease is realized, markets the day of the meeting may remain flat or decrease a bit more. If the expectations are not met, and the Fed does not lower the rate as anticipated, you may find that rates actually go up from the day before the meetings prices. Its a roll of the dice for rate watchers.
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