The Federal Reserve Board once again cut two key interest rates today. The Fed lowered its target for the federal funds rate by 50 basis points to 3.00 percent. The federal funds rate is the rate consumers pay on credit cards, home equity lines of credit and automobile loans. The Fed also reduced its target for the discount rate by 50 basis points to 3.50 percent. This is the rate banks pay to borrow money from the central bank.
Today’s cuts were the second significant rate reductions made by the Fed in the last ten days, as the central bank continues its attempt to ward off the possibility of a U.S. economic recession. The accompanying Fed statement cited growing concerns about the weakening economy and indicated more rate cuts might be necessary.
“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the statement said. The statement also mentioned the housing market continues to deteriorate.
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.