The Federal Reserve Board once again cut a key interest rate at its meeting on Tuesday, March 18. The Fed lowered its target for the federal funds rate by 75 basis points to 2.25 percent. The federal funds rate is the rate consumers pay on credit cards, home equity lines of credit and automobile loans.
Yesterday’s cut was the sixth rate reduction in the past six months. As the central bank continues to allay fears of a U.S. economic recession, it also has the challenge of keeping a watchful eye on inflation. The accompanying Fed statement cited a weakening labor market, a slowdown in consumer spending, the continued crisis in the financial markets and tight credit markets as reasons for its decision.
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.