Federal Government Cuts Interest Rates

The US Federal Government has recently announced a large 75 basis point rate cut, which brings the total key rate to only 2.25%. In doing so, the prime rate will also fall, bringing itself down three-fourths of a percentage point, leaving it at 5.25%.

This strategic maneuver, deftly employed by the FOMC, or Federal Open Market Committe, closely trailed a .5% cut in the month of January and brought the total federal funds rate down to the lowest level established since late 2004.

This action, being the sixth consecutive cut to interest rates these past two years, was done with the goal of promoting consumer spending and borrowing in order to boost the lagging economy and recharge the financial landscape, thus improving buying power across the board.

Originally, the federal government was rumored by several economic analysts to cut rates a full percentage point, but this wasn’t the case. The federal government has spoken on this issue and said that they believed such an action would of brought on too much inflation and ended up thwarting their intentions.

Despite the moderate cut, plenty of financial leaders are optimistic about the results, saying that the cut in interest rates should be a very welcome opportunity for consumers to take advantage of low rate credit cards and even some loans, considering that there are plenty of new opportunities for some of the lowest rates out there.

Indeed, it seems that since the prime rate has fallen, interest rates everywhere should also likewise see a sharp reduction, bringing a great deal of relief to a large portion of the consumer market. It is believed that interest rates will fall approximately .75% on almost all variable rate cards.

The federal government, despite the optimism present, remains conservative on the issue and have adapted a “wait and see” approach to the matter. A government representative has said that inflation has elevated in recent history, and that some expectations for further inflation are expected to decrease as the year goes on. In doing so, this matter should reduce the cost of resources and relieve the pressure on consumers anxious about the current status and outlook of the economy.

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