SEARCH BLOG: FEDERAL RESERVE
As I said on August 13 and today, the Fed is getting nervous, but it is not quite ready to lower interest rates that affect housing or other consumer purchases. Right now it is hoping a bandaid will fix things... it won't.
NEW YORK (CNNMoney.com) -- The Federal Reserve, reacting to concerns about the subprime lending crisis and the volatility in the financial markets that have resulted from it, announced Friday that it is cutting its so-called discount rate temporarily by a half percentage point, to 5.75 percent.
The discount rate is the rate the Federal Reserve banks across the country charge qualified lenders - mainly banks - for temporary loans. It is largely symbolic.
The central bank did not change its more closely watched federal funds rate, which affects rates that consumers pay on various types of loans. That rate remains at 5.25 percent.
The Fed last met Aug. 7 and decided to leave both the federal funds and discount rates unchanged. But since then, stocks have plunged further due to fears that some financial institutions and hedge funds were in serious trouble because of the mortgage meltdown.