Fed cuts feds funds rate and discount rate
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The Federal Open Market Committee cut a key economic rate by a quarter of a basis point. The Federal funds rate now stands at 2%.
In the United States, the federal funds rate is the interest rate at which private depository institutions (mostly banks) lend balances (federal funds) at the Federal Reserve to other depository institutions, usually overnight. Changing the target rate is one form of open market operations that the Chairman of the Federal Reserve uses to regulate the supply of money in the U.S. economy.
Speaking about the current state of the economy, the fed reported that “Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.”
In a related move, the committee unanimously decided to cut the discount rate to 2.25%. The fed however declined to give any hint about the future direction on further rate changes. Markets were down sharply after the announcement.
