Fed Cuts Interest Rate to 1%, Lowest Level in 4 Years

The Federal Reserve cut the key rate by half a percent, to 1%; the Fed noted, "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures... the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit." The last time the interest rate was 1% was, according to CNBC, the "12-month period from June 2003 to June 2004." The NY Times summed up: "While Fed policy makers now have less room to maneuver on interest rates if the economy deteriorates further, investors had been hoping for the relatively aggressive cut as a sign of vigilance among American central bankers seeking to restore the free flow of credit." Right now, the stock market is relatively unchanged.

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By Jen Chung in News on October 29, 2008 2:45 PM

Comments [rss]

starrygordon

The credit bubble which led to the present catastrophe was inflated by low interest rates dictated by the FRB. This is more of the same, but now it is an attempt to replace disappeared private credit with government credit. It probably won't work. If it does work, it will only lead to an even bigger catastrophe in the future. Meanwhile, the Federal budget deficit, trade deficit, deindustrialization, imperialism, growing inequality, and deterioration of the infrastructure will continue to do their destructive work unhindered by government or private leadership, whose only solution to any problem is easy money.

The Third World welcomes you....

NannyState

What's the point of lower interest rates if nobody will lend money? Raise it, lower it, I don't care, just keep sending me those $600 rebate checks you stupid Fed Fuck!

Future Taliban

Allah Akbar!. the USSA continues to slide down the slippery slopes of economic oblivion!.

I'm SO HAPPY !!!!!!!!!!!

jterry121

Karate Kim should Kick Bernanke's Ass

Karate Kim

A lot of people have criticized the Fed for being lax on inflation, as they focused on “core inflation” which excludes the big food and energy prices. However Bernanke seems to have been right, inflationary pressure from commodities has reversed dramatically. The price spike in commodities (which freaked out the consumer) was a bubble, which has deflated due to the grim outlook on the economy (Oil is in the $60’s down from the $140s in 4 months). Look at all the value deterioration in the stock markets, 0% financing for big ticket items like cars and all the major sales at department stores (going to be worst holiday season ever), deflationary fear should be and is driving Fed policy. Deleveraging of companies and banks is what we are seeing in the markets, combined with deflation of prices can lead to horrendous results, look at the Great Depression.