Industry Reacts to Fed’s Latest Cut to Interest Rates

For the third time in 2019 the Federal Reserve slashes interest rates, dropping its benchmark lending rate Wednesday by another quarter of a point. 

The Fed released a statement saying it has lowered the target range for Federal funds rate to 1.5% to 1.75%.

Doug Duncan, Chief Economist with Fannie Mae, said the Fed cited "implications of global developments" as rationale for the cut.

Although the Fed has lowered rates to spur economic growth, Jarred Kessler, CEO of EasyKnock, said that plans doesn't always work out.

"Lowering rates doesn’t always have the economic impact we think, or expect it to have because it disrupts the natural economic ecosystem," Kessler said. "Just look at Japan, it can drive housing growth and a push in the stock market, but other facets of the economy are bound to lose. In the longer term this along with inflation can have a very negative impact."

Kessler, however, added the continual slashing of interest rates will help drive mortgage rates lower. He also said rental rates could also fall with the most recent cut.

Duncan noted that market expectations are to be biased toward no further cuts, Fannie Mae is forecasting an additional cut in January based on trade uncertainties and other global risks.

George Ratio, Senior Economist at realtor.com, however, said the Fed was unclear about next steps, and the outlook remains cautions, evident by dissenting votes at the meeting.

A report by NBC News leading up the cut said there was a 94% probability of a quarter-point rate cut, with just a 6% chance of no change.

NBC further stated that easing of trade tensions with China is working in the Fed’s favor.  

The Fed’s last rate cut came on September 18 when it dropped its benchmark lending rate to 1.75% to 2%. Interest rates were cut for the first time in a decade on July 31.