The Federal Reserve cut the target for the federal funds rate and the discount rate by 50 basis points.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Federal Reserve release
Consumer credit rose $7.4 billion, or 3.7% (annualized), in July, lower than the 5.9% rate from May to June. Revolving credit rose $5.0 billion, or 6.6%. Non-revolving credit rose $2.5 billion, or 1.9%.
Consumer credit release
The Federal Reserve released the Beige Book today, which summarizes comments made to the Fed by businesses, bankers, and others.
The Fed reports tightening mortgage lending standards but limited impact to the broader economy outside of the real estate sector.
Most Banks reported that the recent developments in financial markets had led to tighter lending standards for residential mortgages, which was having a noticeable effect on housing activity, and several noted that the reduction in credit availability added to uncertainty about when the housing market might turn around. While several Banks noted that commercial real estate markets had also experienced somewhat tighter credit conditions, a number commented that credit availability and credit quality remained good for most consumer and business borrowers. Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited.
Beige Book