09/17/2007

Better Early than Never

Hello:

As you may have seen in previous e-Updates, we were not expecting the Fed to begin to cut interest rates until next year. Our thoughts were that the economy would need a little push before the Presidential Election, and so 2008 would see declining interest rates.

Then the mortgage bubble burst. The Fed is under tremendous pressure to lower interest rates quickly in order to ameliorate the pain of the credit crunch. Pundits are no longer arguing whether the Fed will cut rates at tomorrow's Federal Open Market Committee (FOMC) meeting, but rather how much will the rate cut be?

We would be surprised if FOMC Chairman Bernanke lowered the Fed Funds rate by more than 1/4% (25 basis points) tomorrow. The Fed's earlier action of lowering the discount rate seems to have helped stabilize the lending community for now. A drop in the Fed funds rate of 1/4% tomorrow would help the lending community catch their breath.

For faster service, please direct all future Foundation Services Group fax communications to 909.866.6002.

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager