Fed Reduces Key Interest Rate to All-Time Low

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UPDATED: Feb 25, 2020

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The Federal Reserve today cut its key fed funds rate by one-half a percentage point to 1.0 percent. That is the lowest the fed funds rate has ever been, matching the level last seen in June of 2004.

The Fed acknowledged the current economic downturn in its closely watched statement noting, “The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures.”

In other words, consumers are not spending money according to normal spending patterns. With Election Day less than one week away, many economists believe we are getting close to the bottom of this cycle. The hope is the economy will see an upturn in activity with the election behind us and the holiday season on the horizon.

The federal funds rate is an overnight bank lending rate that affects rates on various types of loans such as variable-rate mortgages and credit card rates, among others. The rate may also impact rates on various investment and insurance products offered by life insurance companies.

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