Fed cuts rate by 50 bps to 1.0%

The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.

The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president.

The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.

Further rate cuts would make it very inexpensive for banks to borrow from one another. The Fed is hoping that low rates, along with efforts to increase liquidity, will spur greater lending and borrowing, unfreezing credit markets.

Many consumer and business lending rates have remained high. The average mortgage rate last week was at 6.3 percent, according to Bankrate.com, above the level of earlier this year.

Source: EconomicTimes