The Federal Reserve on Tuesday cut interest rates for the 10th time this year, in another bid to help jump-start the weak U.S. economy. The federal funds rate was lowered 50 basis points to 2 percent, a level not seen since the early 1960s. The funds rate is the interest that banks can charge each other for overnight loans.
The Fed also lowered the discount rate, the interest rate it charges banks to borrow, by 50 basis points to 1.5 percent.
In 1999 and 2000, the Fed raised the funds rate six times for a total increase of 1.75 percentage points to a high of 6.5 percent in May. It also raised the discount rate five times, to 6 percent, an increase of 1.5 percentage points.
However, recent economic data have indicated that the U.S. economy might be slowing too much. The Gross Domestic Product, the value of all U.S. goods and services, grew 1.9 percent in the fourth quarter of 2000, 1.3 percent in the first quarter of 2001 and a timid 0.3 percent in the second quarter. Preliminary data for third-quarter GDP showed that economic growth fell by 0.4 percent. --Sam Ames, Special to ZDNet News