Fed Cuts Key Rate a Half Point
WASHINGTON, Nov 06, 2001 (AP Online via COMTEX) -- The Federal Reserve cut a
key interest rate Tuesday by a half point, its latest effort to rescue an
economy battered by the terror attacks and edging toward recession.
The Fed's cut, the 10th this year, is aimed at cushioning the economic blow from
the Sept. 11 attacks. In their aftermath, consumer confidence has plunged,
unemployment has soared and manufacturing, the weakest part of the economy, has
sunk deeper into its own recession.
Economists are hopeful lowering borrowing costs will persuade consumers and
businesses to spend and invest, which would prevent further weakening of the
economy.
After a closed-door meeting, Federal Reserve Chairman Alan Greenspan and his
colleagues announced they were cutting the target for the federal funds rate,
the interest banks charge each other on overnight loans, to 2 percent, the
lowest since September 1961.
In response, commercial banks were expected to reduce their prime lending rates,
the benchmark for millions of consumer and business loans, by a similar
half-point to 5 percent, the lowest level since June 25, 1972.
"Heightened uncertainty and concerns about a deterioration in business
conditions both here and abroad are damping economic activity," the Fed said in
a statement.
In the part of the statement that reflects possible future action, policy-makers
held the door open to further rates cuts.
"The risks are weighted mainly toward conditions that may generate economic
weakness," the Fed said.
Copyright 2001 Associated Press, All rights reserved
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