WASHINGTON - 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.
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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.
In a brief statement explaining Wednesday's action, the Fed said that the "intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and business to obtain credit."
The central bank said that "downside risks to growth remain" holding out the promise of further rate cuts if needed. The rate-cut decision was unanimous.
Federal Reserve Chairman Ben Bernanke and his colleagues pledged that they would "monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability."
Wall Street had staged its second biggest point surge ever on Tuesday with the Dow Jones industrial average climbing by 889 points in anticipation of the Fed's action. Trading was more subdued on Wednesday with the Dow actually down by about 30 points in the first 15 minutes after the afternoon announcement, and then showing a roughly 30-point gain shortly after that.
Many analysts believe the Fed will not stop at 1 percent if officials see the need to cut rates further. Some are forecasting another half-point move at the Fed's last meeting of the year on Dec. 16.
But other economists said with rates already so low, the Fed may decide to hold at 1 percent, leaving some room for a further reduction if needed next year should the country's economic troubles intensify.
In its statement, the Fed indicated it had room to lower rates because the spreading economic weakness was lowering the risks that inflation would get out of control. Indeed, the weakness has caused dramatic declines in the price of oil and other commodities.
While many economists believe the country has already fallen into a recession, they think the aggressive efforts by the Fed to cut rates and take other actions to unfreeze credit markets will keep the country from plunging into a prolonged and deep downturn.
The Fed's action was expected to be quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, by a similar half-point.
The central bank also announced that it was lowering its discount rate, the interest it charges to make direct loans to banks, by a half-point to 1.25 percent. This rate has become increasingly important as the central bank has dramatically increased direct loans to banks in an effort to break the grip of the credit crisis.
Bernanke pledged in a speech earlier this month that the Fed "will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity."
In addition to the rate cuts, the Fed has been moving to pump billions of dollars into the banking system to help unfreeze markets that seized up in dramatic fashion last month. The ensuing meltdown of financial markets caused the Bush administration to successfully lobby Congress to pass on Oct. 3 a $700 billion rescue package to make direct purchases of bank stock and buy up bad assets as a way of getting financial institutions to start lending again.
That money started flowing earlier this week with $125 billion going to nine of the nation's biggest banks. Other industries, including automakers and insurance companies, are in talks with the administration to get a share of the bailout funds.
And there is pressure from lawmakers to deploy some of the bailout resources to provide mortgage guarantees to encourage more banks to rework home loans to stem a record tide of foreclosures.
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You are exactly right. I have a Credit Card with BOA and had 9.9% for life. Out of the blue the smacked 18.% on it. They did not lower my credit limit. I called them and I never got an answer that was satisfactory as to why. They said the periodiically review credit. I said then why the increase? Again no definitive answer. They did cut it to 13%. I fixed them I paid it off in 4 months and had a 0 balance. Now they send me all sorts of things with 0% for a year. 4.9% for life of the transaction. Forget it. You know the old fool me once thing. I had credit with for many years. Tough cookies. After this was paid off I cut my own credit amount to $2500 they had upped it through the years to $26,000. Good grief what are these people trying to do to us?
Thoughtful, Oklahoma City - Oct 31, 2008 at 9:23 am
Chase reduced my credit limit to within a few dollars of my actual balance. Add in the month’s interest and presto, another $39.99 over-limit charge.
Worth mentioning are the side effects of all their crookedness.
~ Their forced over-limit on my credit report causes my scores to drop.
~ My credit cards with other companies see my Chase forced over-limit and THEY cut my credit limit. This cause my scores to drop even further and sets off yet another round of rate increases and over-limit penalties.
~ The credit bureaus compare total credit limits to actual balances. Because Chase cut my available credit to actual balances, I’m shown to be using almost 100% of my available credit. This throws me into a high risk category and limits my ability to take on any type of new credit… Auto loans, business loans, etc. This additional risk-layering causes yet another round of rate increases with all my credit lines.
~ Because Chase has me caught up in their circle of destruction, my credit scores have dropped to where I am now considered a “subprime” borrower. In these perilous times, being subprime is not where you want to be.
~ Obscene credit card rates.
~ Subprime home loans are not available.
~ Homeowners and auto insurance increased 35%
~ Financing for business expansion is cut off
All this, and I’ve never been late on any payment for more than 35 years. NEVER
It’s impossible to calculate the exact dollar amount Chase and the other card companies have cost me and my business. A few hundred thousand dollars is not unreasonable. And… they are NOT picking on me. They are equal opportunity thieves. No doubt they have picked at least a few hundred million dollars from their customers pockets.
These are The Robber Barons of the 21st century. They consistently funnel some of their booty through lobbyists to the Congress so as to ensure their larceny continues unchecked.
We have some great local Banks. We have some great local Mortgage Lenders. We shop where you shop. Our children go to school together. Let’s keep it local.
I had 5 cards with Chase. I did not start with them; they bought my accounts from other banks.
Initially, I was guaranteed rates in the 7 to 10% range. For life...
~ Perfect credit... 760 score
~ Never late
~ Mature accounts …11 to 14 years old
Chase bought my accounts. Within a couple of months, they heisted (sic) rates to 29.99%.
Here is one of several ways Chase periodically and enthusiastically robs its customers of millions of dollars.
When the newly heisted 29.99% interest hits your balance that 1st month, you exceed your credit limit. Then, they nail you for an over limit fee of $39.99
Say... 500,000 customers... @ $39.99 each ...
$20 million extra income for the day. For Chase.
Chase could give the mafia a few lessons. They are crooks. Big box national banks are not an Oklahoman’s friend. 20 years ago they were not here. Why did we let them in?
>
Interesting..please do. I bank at 3 banks. One local, BOA and a online bank. My best friend works at the local bank. When charges were made to my ATM card I went to this bank and all they did was take my ATM card, distroy it and make me fill out papers for two hours and made me feel like I had done it. The charges were made through Pay Pal. I had the phone number and I am the one who had to follow through and get Pay Pal to return the money to my account. This bank did not do one thing to help, plus it took two weeks to be able to use my account, I could deposit, not withdraw. The next month $8000 worth of charges were on my BOA credit card all charged in 3 days at Walmart, Lowes, and Home Depot.I found these charges on the internet and went stright to the bank. (local bank's internet account is hard to navagate and never up to date). At BOA they immediately issued me a new card, allowed me to use my account. Treated me like I was a victim, not the crook. The paper work took 5 minutes. As for the internet banking. As of today I get 3.50% on my Money Market vs .75% locally. I get stiffed by a bank and I am gone. Plenty of others out there wanting business. My husband and son-in-law both bank at very small one branch local banks. They have never had a problem borrowing from these banks for various business deals. Big banks take weeks and never want to loan an amount that is required.
Thoughtful, Oklahoma City - Oct 30, 2008 at 9:32 am
I think that the last 4 times the Feds have lowered the rates, mortgage rates have gone up. In fact one day last week mortgage rates were 7% for 30 fixed rate. Still not a bad rate at all. If you would like to protest something my vote is to credit card companies that are raising interest rates to all time highs. A Friend had a fixed rate 9.9% interest rate at BOA and was notified this summer that her rate was increasing to 19.99% Oct 1. She had just combined 2 other high rate cards into this account because Discover raised her to 28.99%. She has never missed a payment and had chared this 18 months before. Sad. Now she is in a bind. These cards were used to pay down hospital bills that insurance did not cover. She has had to put her house on the market, no one is looking. Another good way to pass time is to notify your congressman that if our money is going to be used to bail out these institutions then they need to see that the CEO's salery is re-negotiated and bonus discontinued until they are on their feet and showing a profit. (I know it is out of the question to every question why they get these bonus's in the first place if the company is not showing a profit).
Thoughtful, Oklahoma City - Oct 29, 2008 at 5:01 pm
I'm at work listening to my friend (Chinese) talk to another guy (Russian)about how China's Stockmarket fell 60% at the beggining of this year.....Where were all the headlines then?
Now that banks can access short-term money at that percentage, when do they propose again making loans available to good risks? Nothing the Federal Reserve does matters unless commercial banks gradually lose their fear of making ANY loans.
No, mortgage rates DID NOT drop a half-point. And no, mortgage rates ARE NOT 1%.
It's true... unless you engage a lender referred by: Bank Rate.com or Lending Tree.com...
Those guys will hook you up. 30 year mortgages at 4.0% with only $18,000 in closing costs.
Worth mentioning is Quicken Loans.com and Ditech.com... they'll give you a .5 rate good for one month then it goes to 13.00% for the remaining 29 years and 11 months.
And that's on the morning drive radio.
Going home, they will offer to buy you out of that nasty one month adjustable rate they just put you into and "give" you a 6.125% fixed rate with only $14,000 in closing costs.
An unbelievable number of y’all have bought those internet based bait-and-switch, fee gouging companies.
You have plenty of reputable lenders right here in you own back yard. Global is NOT better. Talk to your friends, family, builders and realtors. They know the good (local) lenders.
>
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You are exactly right. I have a Credit Card with BOA and had 9.9% for life. Out of the blue the smacked 18.% on it. They did not lower my credit limit. I called them and I never got an answer that was satisfactory as to why. They said the periodiically review credit. I said then why the increase? Again no definitive answer. They did cut it to 13%. I fixed them I paid it off in 4 months and had a 0 balance. Now they send me all sorts of things with 0% for a year. 4.9% for life of the transaction. Forget it. You know the old fool me once thing. I had credit with for many years. Tough cookies. After this was paid off I cut my own credit amount to $2500 they had upped it through the years to $26,000. Good grief what are these people trying to do to us?
5 Chase cards with their set credit limits.
Chase reduced my credit limit to within a few dollars of my actual balance. Add in the month’s interest and presto, another $39.99 over-limit charge.
Worth mentioning are the side effects of all their crookedness.
~ Their forced over-limit on my credit report causes my scores to drop.
~ My credit cards with other companies see my Chase forced over-limit and THEY cut my credit limit. This cause my scores to drop even further and sets off yet another round of rate increases and over-limit penalties.
~ The credit bureaus compare total credit limits to actual balances. Because Chase cut my available credit to actual balances, I’m shown to be using almost 100% of my available credit. This throws me into a high risk category and limits my ability to take on any type of new credit… Auto loans, business loans, etc. This additional risk-layering causes yet another round of rate increases with all my credit lines.
~ Because Chase has me caught up in their circle of destruction, my credit scores have dropped to where I am now considered a “subprime” borrower. In these perilous times, being subprime is not where you want to be.
~ Obscene credit card rates.
~ Subprime home loans are not available.
~ Homeowners and auto insurance increased 35%
~ Financing for business expansion is cut off
All this, and I’ve never been late on any payment for more than 35 years. NEVER
It’s impossible to calculate the exact dollar amount Chase and the other card companies have cost me and my business. A few hundred thousand dollars is not unreasonable. And… they are NOT picking on me. They are equal opportunity thieves. No doubt they have picked at least a few hundred million dollars from their customers pockets.
These are The Robber Barons of the 21st century. They consistently funnel some of their booty through lobbyists to the Congress so as to ensure their larceny continues unchecked.
We have some great local Banks. We have some great local Mortgage Lenders. We shop where you shop. Our children go to school together. Let’s keep it local.
These are my humble opinions. ~
>
Initially, I was guaranteed rates in the 7 to 10% range. For life...
~ Perfect credit... 760 score
~ Never late
~ Mature accounts …11 to 14 years old
Chase bought my accounts. Within a couple of months, they heisted (sic) rates to 29.99%.
Here is one of several ways Chase periodically and enthusiastically robs its customers of millions of dollars.
When the newly heisted 29.99% interest hits your balance that 1st month, you exceed your credit limit. Then, they nail you for an over limit fee of $39.99
Say... 500,000 customers... @ $39.99 each ...
$20 million extra income for the day. For Chase.
Chase could give the mafia a few lessons. They are crooks. Big box national banks are not an Oklahoman’s friend. 20 years ago they were not here. Why did we let them in?
>
When I get to my office tomorrow, I will give you specifics about the BIG BOX BANKS that have taken Oklahoma.
The credit card companies are as crooked as a dog's hind leg.
and... they are not just a credit card company...
They are the big box national banks that your tax dollars are "bailing out."
Chase is the most crooked.
How many of you bank with Chase? Bank of America?
Why?
Vote Oklahoma. You have plenty of local banks... keep your money local.
Global economy is NOT better.
No, mortgage rates DID NOT drop a half-point. And no, mortgage rates ARE NOT 1%.
It's true... unless you engage a lender referred by: Bank Rate.com or Lending Tree.com...
Those guys will hook you up. 30 year mortgages at 4.0% with only $18,000 in closing costs.
Worth mentioning is Quicken Loans.com and Ditech.com... they'll give you a .5 rate good for one month then it goes to 13.00% for the remaining 29 years and 11 months.
And that's on the morning drive radio.
Going home, they will offer to buy you out of that nasty one month adjustable rate they just put you into and "give" you a 6.125% fixed rate with only $14,000 in closing costs.
An unbelievable number of y’all have bought those internet based bait-and-switch, fee gouging companies.
You have plenty of reputable lenders right here in you own back yard. Global is NOT better. Talk to your friends, family, builders and realtors. They know the good (local) lenders.
>
Google "Federal Reserve" and study for a few hours. Scary!
>
And no, mortgage rates ARE NOT 1%.
>