Federal Reserve cuts rates again

Posted by CCOB

January 30, 2008

Central bank cuts the rate by half-percentage point, as was expected by Wall Street, but will it make things better or worse?
The Federal Reserve cut the short-term I.R. by a half-percentage point today. This is the second cut in just over a week! Will this work or is it simply a band aid solutions to a much more fundamental problem? This move is trying to combat a U.S. recession, but will it be enough or a day late and a dollar short?

U.S. stocks which have been taking a beating the last couple of weeks surged on news of the rate cut.

masters of the interest rate setting process

Originally uploaded by fintag

Just four months ago the rate was at 5.25% and after todays cut at 3%! This rate will effect everything from how much interest consumers pay on their credit cards, home equity lines of credit, student loans, auto loans and so on.

Also the discount rate (what banks pay to borrow directly from the Federal Reserve) was also cut by a half-percentage point to 3.5% today. The cut was made at the request of nine of the 12 Federal Reserve district bank presidents from around the country.

Brace yourselves we might be on for a bumpy road.

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