Fed Cuts Interest Rates

The Federal Reserve lowered the federal funds rate by a quarter-point to 4.5% in an effort to stimulate economic activity and keep the country from dipping into a recession. It also cut the discount rate by a quarter-point. It was the second straight monthly rate cut, which will make it cheaper for consumers and businesses to borrow money. However, Fed policymakers signaled that the cuts may be all that is needed to deal with the economy. The Fed panel said it judges that "the upside risks to inflation roughly balance the downside risks to growth." Commenting on the economy, the Fed struck a more positive tone than it did in September when it expressed concerns about the toll the August credit crisis would have on housing and the overall economy. In the current statement, the Fed said, "Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance."

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