WASHINGTON – Federal Reserve policymakers are expected to slash a key interest rate by a half-point, pushing the federal funds rate down to 1 percent, as they wrap up a two-day meeting Wednesday.

The worst financial crisis in 70 years has forced the Fed to employ all the weapons in its arsenal —including cutting interest rates to near historic lows — to try to keep the country from plunging into a deep recession.

A new cut would put the Fed's target for the interest banks charge each other on overnight lows down at level last seen during a 12-month period from June 2003 to June 2004. Before that period, the funds rate had not been that low in 45 years, since Dwight Eisenhower was president.

Economists believe the Fed is prepared to cut rates that low because of the rising fears that the financial turmoil of the past two months is raising the specter of a deep and prolonged recession.

A half-point rate cut on Wednesday would push borrowing costs lower for millions of consumer and business loans with banks moving quickly to match the Fed's action by lowering their benchmark prime lending rate from 4.5 percent, where it has been for the past three weeks, down to 4 percent.

The Fed is hoping that the sharply lower rates will help boost economic growth going forward. The government will release its first look at economic activity in the July-September quarter on Thursday and that is expected to show that the gross domestic product shrank at a rate of 0.5 percent in the third quarter.


linkhttp://news.yahoo.com/s/ap/20081029/ap_on_bi_ge/fed_interest_rates

what are your thoughts? Do you think the Federal govt may just help the economy? Do you think this reduction will boost loans/mortgages et al?

isn't this what started this mess

lets keep cutting rates

so more people borrow money

the that borrow the more that will default

the more that default

the more loss there is for the lender

the more loss for the lender

the higher likelihood they go under

the more that go under

the higher the chance of another bailout

does the govt have another 700 billion laying around

or are they going to start another form of taxation to get it

This interest rate cut is the rate banks get when they borrow money.

It does have some affect on consumer loan rates but it is the banks that see the benefit.

The banks need an good enema to get the money flowing.

Feds need to keep doing things to restore confidence in the markets.

They also need to tighten up the laws that allow the gamblers and scoundrels that have been scamming the system to be shut down.

No I actually think it was the greed and ignorance of the lending institutions that got us in this mess. They loaned money knowing and expecting the recipients would default on loans, then the sh!t hit the fan. They got more defaults than expected.