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