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Federal Reserve Rates at 39-Year Low

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The Federal Reserve today lowered the Fed Funds rate to a Japanesque 2.5%. The announcement came as consumer confidence plummeted and the economy continued to show signs of weakness. The Fed rate is the lowest it has been since 1962.

The terrorist attacks have significantly heightened uncertainty in an economy that was already weak. Business and household spending as a consequence are being further dampened. Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate.[/:Author:] -From the Federal Open Market Committee's 10/02/2001 Statement

 

 

Recent Changes to Fed Funds and Discount Rates

1995

Discount Fed Funds
February 1
5 1/4
6
July 6
 
5 3/4
December 19
 
5 1/2

1996

 
 
January 31
5
5 1/4

1997

 
 
March 25
 
5 1/2

1998

 
 
September 29
 
5 1/4
October 15
4 3/4
5
November 17
4 1/2
4 3/4

1999

 
 
June 30
 
5
Aug 24
4 3/4
5 1/4
Nov 16
5
5 1/2

2000

 
 
Feb 2
5 1/4
5 3/4
Mar 21
5 1/2
6
May 16
 
6 1/2
May 19
6
 

2001

 
 
Jan 03
5 3/4
6
Jan 04
5 1/2
 
Jan 31
5
5 1/2
March 20
4 1/2
5
April 18
4
4 1/2
May 15
3 1/2
4
June 27
3 1/4
3 3/4
August 21
3
3 1/2
September 17
2 1/2
3
October 2
2
2 1/2

                        Federal Reserve Bank Data

The Fed cuts came amidst widespread concensus that the U.S. economy had slid into recession. The terrorist attacks in New York and Washington served to exacerbate the problems with a U.S. economy that was already showing signs of softness. The effect of the attacks could be seen directly in the devastation in New York, and indirectly, in falling consumer confidence that has had a ripple effect on the rest of the economy.