The Real Deal Miami

Fed cuts benchmark rate to nearly zero

December 16, 2008 03:30PM

The Federal Reserve today cut the federal funds interest rate to a
range of 0 to 0.25 percent, a record low. The rate had previously been
1 percent, and a cut of half a percentage point had been expected. The
cut affects the rate at which banks lend each other their reserves, but
demand for these loans recently has been low, so the move may be a
primarily symbolic one. The rate cut indicates that deflation, a wide
decline in consumer prices, is a possible problem.