Fed Cuts Key Interest Rate

Los Angeles Times (03/19/08); Gosselin, Peter G.
The Federal Reserve has reduced the federal funds rate by three-quarters of a percentage point, to 2.25 percent, in an effort to lower interest rates across the board, alleviate the credit crunch and prevent the economy from sliding into recession. The central bank also slashed the discount rate to 2.5 percent. The federal funds rate and the discount rate stood at 5.25 percent and 6.25 percent, respectively, last August; but the Fed's cuts since then have not produced the effect policymakers had anticipated because many banks have not respond by lowering rates on mortgages, credit card debt and business loans. "The cuts show they recognize there's almost a lust for panic going on in the financial markets, and the only way to stop it is to make sure there is liquidity available, no matter what," says Roger Kubarych, a former senior official at the Federal Reserve Bank of New York who now is chief economist at UniCredit Global Research. "They've become the liquefier of last resort."