Fed lowers short-term interest rates
There was buzz that this cut would be a full (and unusual) point, but the Federal Reserve opted for a drop of three-quarters of a percentage point. That leaves the federal funds rate, which determines what banks charge each other for overnight loans, at 2.25 percent.
The last time the rate was that low? At the end of 2004 and beginning of 2005.
The Fed, which is being urged to cut by some market players and urged not to by others who fear the result is higher inflation, had this to say:
Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.
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