Post by Champs Elysees on Jan 30, 2008 15:03:44 GMT -5
Fed delivers another rate cut
By Chris Isidore, CNNMoney.com senior writer
January 30 2008: 2:44 PM EST
NEW YORK (CNNMoney.com) -- The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday, its second significant cut in just over a week, as the central bank tries to combat the growing risk of a U.S. recession.
The federal funds rate, an overnight bank lending rate that affects how much interest consumers pay on credit cards, home equity lines of credit and auto loans, was cut to 3.0% from 3.5%. The rate had stood at 5.5% only four months ago.
Read the Fed statement
U.S. stocks, which had been slightly lower ahead of the announcement, surged on news of the rate cut.
The discount rate, which is what banks pay to borrow directly from the Fed, was also cut by a half-percentage point to 3.5% on Wednesday. The cut was made at the request of nine of the 12 Federal Reserve district bank presidents from around the country.
The Fed cut both rates by three-quarters of a percentage point in an emergency move on Jan. 22.
One member of the Federal Open Market Committee, Dallas Fed President Richard Fisher, voted against the cut in the fed funds rate, arguing that rates should have been left unchanged after the series of rate cuts by the central bank in recent months. Fisher is generally seen as a so-called inflation hawk who is greatly concerned with maintaining price stability.
The Fed's statement acknowledged that the risk of inflation needs to be monitored, but said that the majority of members believed that price pressures to moderate in coming quarters.
It said the rate cuts were necessary because problems in the credit markets were putting a squeeze on both consumers and businesses. It also sees growing weakness in both the job market and the battered housing market.
"Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity," said the statement. "However, downside risks to growth remain."
Economy much weaker than expected
The rate cuts come on a day the government reported that economic growth slowed significantly in the last three months of 2007, matching its weakest performance of the past five years. It also comes as Congress rushes to pass a $150 billion economic stimulus package to spur spending by both consumers and businesses.
By Chris Isidore, CNNMoney.com senior writer
January 30 2008: 2:44 PM EST
NEW YORK (CNNMoney.com) -- The Federal Reserve cut a key short-term interest rate by a half-percentage point Wednesday, its second significant cut in just over a week, as the central bank tries to combat the growing risk of a U.S. recession.
The federal funds rate, an overnight bank lending rate that affects how much interest consumers pay on credit cards, home equity lines of credit and auto loans, was cut to 3.0% from 3.5%. The rate had stood at 5.5% only four months ago.
Read the Fed statement
U.S. stocks, which had been slightly lower ahead of the announcement, surged on news of the rate cut.
The discount rate, which is what banks pay to borrow directly from the Fed, was also cut by a half-percentage point to 3.5% on Wednesday. The cut was made at the request of nine of the 12 Federal Reserve district bank presidents from around the country.
The Fed cut both rates by three-quarters of a percentage point in an emergency move on Jan. 22.
One member of the Federal Open Market Committee, Dallas Fed President Richard Fisher, voted against the cut in the fed funds rate, arguing that rates should have been left unchanged after the series of rate cuts by the central bank in recent months. Fisher is generally seen as a so-called inflation hawk who is greatly concerned with maintaining price stability.
The Fed's statement acknowledged that the risk of inflation needs to be monitored, but said that the majority of members believed that price pressures to moderate in coming quarters.
It said the rate cuts were necessary because problems in the credit markets were putting a squeeze on both consumers and businesses. It also sees growing weakness in both the job market and the battered housing market.
"Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity," said the statement. "However, downside risks to growth remain."
Economy much weaker than expected
The rate cuts come on a day the government reported that economic growth slowed significantly in the last three months of 2007, matching its weakest performance of the past five years. It also comes as Congress rushes to pass a $150 billion economic stimulus package to spur spending by both consumers and businesses.
I hope my interest rates go down . . .