http://money.cnn.com/2008/12/16/news/economy/fed_decision/index.htm?postversion=2008121615Ben Bernanke & Co. cite weakness in economy and reduced inflation threat as justification for cutting rates to a record low range of 0% to 0.25%.
NEW YORK (CNNMoney.com) -- In its latest effort to try and stimulate the U.S. economy, the Federal Reserve cut its key interest rate to a range of between zero percent and 0.25%, and said it expects to keep rates near that unprecedented low level for some time to come.
The central bank typically sets a specific target for its federal funds rate instead of a range. The rate had previously been at 1% and this marks the first time the Fed has cut rates below 1%. Most investors were expecting the Fed to cut rates to either 0.25% or 0.5%.
The federal funds rate is an overnight lending rate used as a benchmark to set rates for a variety of loans, including adjustable rate mortgages, credit cards, home equity lines of credit and business loans. This marks the tenth time it has cut rates in the last 15 months.
Several banks announced they were lowering their prime rate to 3.25% in light of the Fed's decision. Typically, the prime rate is 3 percentage points higher than the fed funds rate. It was 4% before Tuesday's rate cut.
Despite the dramatic nature of the Fed's move, some economists questioned whether it will have much effect on the economy. They said the problem for consumers and businesses right now is not the cost of borrowing, but the availability of credit and the weaker economic fundamentals.
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Dollar falls after Fed rate cut
http://money.cnn.com/2008/12/16/markets/dollarwrite/index.htm?postversion=2008121614Euro surges after U.S. central bank lowers interest rate to near zero, and signals further unconventional moves.
NEW YORK (CNNMoney.com) -- The U.S. dollar fell sharply against major currencies Tuesday after the Federal Reserve announced its decision to cut interest rates.
The central bank said it will establish a target range for its key rate of between 0% and 0.25%. The Fed also said it will establish a discount rate 0.5%.
In addition to the interest rate policy changes, the Fed also signaled that it will continue to explore more unconventional ways to boost economic activity.
The dollar fell sharply against the euro immediately after the Fed's announcement. The 15-nation currency jumped nearly one cent to $1.3890 from 1.3794 just before the rate cut. The euro traded at 1.3699 late Monday.
The pound also surged against the dollar, trading at $1.5388 from $1.5285 before the announcement.
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