The Fed is likely done with interest rate cuts for the time being. The fed funds rate now stands at 2%. The bank of England recently announced they would not be further reducing their key borrowing rate and you can expect the Fed to follow in their footsteps. There are a number of important reasons as to why the Fed is likely to pause with further rate reduction. The rapid rise in oil prices will place an enormous strain on the U.S. economy and will certainly place inflationary pressure in the markets. A key reason why oil has moved up so fast and gas prices are moving up even faster is that the value of the U.S.dollar has declined sharply over the past two years. The Feds actions have helped to ease the credit markets, but their rate cuts have had no meaningful impact on mortgage rates that have slowly moved up since January. The last ingredient to a Fed pause is that they are running out of room to further lower the Fed Funds rate and need the ability to maneuver in the future if the credit markets fail again.

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