The Halifax has posted a report of 2.5% house price falls month on month, the sharpest drop since the early 90s. The year on year figure is still positive at 1.1%

Martin Ellis, chief economist for Halifax said:

Overall, we expect there to be a modest fall in UK house prices this year. Any declines, however, should
be viewed in the context of the significant price rises over recent years. The average UK price has risen
by £120,860 during the past decade from £70,696 to £191,556; an increase of 171%.

Predictably there were some calls for the Bank of England to reduce interest rates but obviously, it is not the BoE’s remit to look after asset prices, rather to target inflation. Furthermore, the Bank of England’s previous interest rate cuts have not been passed on to mortgage borrowers, the private banks have instead been increasing their rates to customers.

Any such downward move in interest rates in the face of massive inflation would destroy the pound’s value against the Euro just in time for British people’s summer holidays.

The Abbey National bank deleted it’s 100% mortgage product today, the last such 100% product available in the UK.

The US Federal Reserve has cut interest rates for the second time in just over a week with the apparent intent of staving off a recession. 9 days ago, they cut from 4.75% down to 4% and many at the time said the move smacked of desperation. They have now cut again by 50 basis points to 3.5% and it is looking increasingly unlikely that their efforts will have any positive effect.

They may actually have a negative effect if the markets start to get the jitters based on the notion that the Federal Reserve is losing their ability to influence the stock markets. After a brief rall upon the news, the Dow Jones and the NASDAQ have both taken a noticeable dives again.

This will hurt the US Dollar and as a consequence, hurt US savers who will be seeing the value of their money diminishing and their interest payments shrinking. The Federal Reserve appears to be trying to buy their way out of a mess by paying with the US citizen’s savings.

Photo Credit: Dan Smith cc-by-sa-2.5

The US Federal Reserve has today cut the base rate of lending by three quarters of a percentage point from 4.25% down to 3.5% amid fears of a major recession in the US economy.

The stock markets have been tanking since yesterday and it seemed that they were briefly buoyed by the news of Federal Reserve Chief Ben Bernanke’s interest rate cut but they may be slipping again as I type. I’m wondering if the situation with the Federal Reserve is rather like kicking a dead cat in a vain hope of making it bounce.

Update: Various commentators in the media have been suggesting that this cut is a sign of desperation and that if it proves ineffective, the Federal Reserve will have severely harmed it’s reputation.