6-26-03 In an act to boost the sagging economy, the Federal Reserve cut its federal funds rate (the short-term borrowing rate for banks) one-quarter of a percentage point to 1% yesterday, the lowest rate since 1958. Cuts in the federal funds rate usually herald the lowering of interest rates, however, some economists are lamenting that the tax cut was not one-half of a percentage point, and are predicting another cut in August. Other economists have predicted that the rate cuts have ended and interest rates will start to rise with a stabilizing economy after the summer. Doug Duncan, chief economist for the Mortgage Bankers Association, sees 30-year fixed mortgage rates rising by about half a point by the end of the year, and yet another three-tenths of a point by the end of 2004. Resulting from efforts to prevent economic deflation with the thirteenth consecutive rate cut since 2001, lower mortgage and interest rates helped push new residential sales to a record high in May (See ?EUR??,,????'??Residential Sales: May?EUR??,,????'??). However, whether or not this will boost the economy is still in question. During economic deflation, consumers hold onto their money to await better prices, a trend that may be seen in May?EUR??,,????'???s 0.3%, and April?EUR??,,????'???s 2.4% dip in sales of durable goods, as reported by the Department of Commerce. When spending decreases, businesses curb investments and activities, and lay off employees. This leads to a lack of purchasing power, which inevitably creates a downward price spiral. Although the dollar is able to buy more at this point, stocks suffer because companies cannot raise their prices, generating smaller profits. However, the Fed is hoping to help invigorate the economy by making home possession more appealing to buyers and home owners. Mortgage rates have already dropped in response to the rate cut. The 30-year fixed-rate mortgage dropped .04% to 5.31%, the 15-year fixed rate adjusted .03% to 4.72%, and the one-year adjustable rate fell .03% to 3.71%. Some economists, such as those at Bankrate.com, are recommending that buyers pounce now on fixed-rate home equity loans. A record new housing market and low interest rates indicate that landscape projects should remain prolific for awhile.