WASHINGTON (AP) -- The Federal Reserve cut a key interest rate by one-quarter of a percentage point Tuesday, trying to keep the country out of recession.
The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.

Commercial banks were expected to quickly match the latest reduction by trimming their prime lending rate, which would reduce this benchmark rate for millions of consumer and business loans to 7.25 percent.

In addition to cutting the funds rate, the Fed announced it was reducing its discount rate, the interest it charges to make direct loans to banks, by a quarter-point as well to 4.75 percent. This reduction was aimed at encouraging banks to borrow more freely from the Fed at a time when there are worries that a rising number of bad loans will prompt banks to tighten credit conditions too severely, adding another strain on the already fragile economy.

The Fed embarked on this round of rate cuts in September in response to severe turbulence in credit markets around the globe as investors reacted to various reports of mounting losses from defaults in subprime mortgages, the latest fallout from the worst slump in the U.S. housing market in more than two decades.

After cutting the funds rate by a half-point on Sept. 11 and a quarter-point on Oct. 31, the central bank indicated that those two reductions might be all that were needed to combat the threat of a recession given that financial markets appeared to be stabilizing.

However, increased market turbulence following the October meeting and growing fears of a recession caused the Fed to do an about-face.

good i love the cut.we need help in the us cost of liveing up medical up you name it the list is to long.

Like they say, "Interest Rate Cuts are like Potato Chips, You Can't Have Just One!"

Looks like we are up to 3 now...I think these bankers need to suffer for lending money like it was candy...So do the people who have got in way over their heads...My Mom and Dad went through the Great Depression and always raised me to stay the hell out of debt...stay away from credit cards...and don't bite off more than you can chew. What has happened to this country?

The Rate Cut will actually cause rates to increase long term.

Oh boy, and I can feel the dollar bill in my wallet getting smaller. Well I guess with stagflation we're screwed either way.

lets all applaud the fiat money printing monster the federal reserve...the rape of america continues..bravo...

Yes, the not federal; no reserve system has done us in folks, it is a criminal system, and totally unconstitutional. The sky is not falling, it already fell, I think. Check out who the private owners are and there are the real criminals and those who support it and back it are also guilty as accomplices. I wonder if some of the principal owners are in England by any chance?

Oh boy, and I can feel the dollar bill in my wallet getting smaller. Well I guess with stagflation we're screwed either way.

Actually, if you follow the currency rates the dollar has been gaining around the world.
Its not a good indicater anyway since the cost of living is cheaper here than in most places. Take Canada for instance. Someone said gas was 4:50 a gallon. I paid 2.89 yesterday!


Comparisons of national wealth are frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living in different countries. (See List of countries by GDP (nominal) per capita.) The advantages of using nominal GDP figures include that less estimation is required, and that they more accurately reflect the participation of the inhabitants of a country in the global economy.


International Monetary Fund
Rank Country Value
1 Luxembourg 81,511
2 Ireland 44,676
3 Norway 44,648
4 United States 43,223
5 Iceland 40,112
— Hong Kong 38,714
6 Switzerland 38,706
7 Netherlands 36,937
8 Denmark 36,920
9 Qatar 36,632
10 Austria 36,368