Once Again, Fed Cuts Interest Rates

May 15, 2001
Federal Reserve policy makers lowered their benchmark interest rate a half percentage point today in the fifth such reduction this year, and suggested at least one more rate cut is possible when it meets June 26 and 27. The target rate for overnight loans between banks was cut to 4%, the lowest in seven years. The Fed also lowered the rarely used discount rate, for loans by the Fed to banks, a half
Federal Reserve policy makers lowered their benchmark interest rate a half percentage point today in the fifth such reduction this year, and suggested at least one more rate cut is possible when it meets June 26 and 27.

The target rate for overnight loans between banks was cut to 4%, the lowest in seven years. The Fed also lowered the rarely used discount rate, for loans by the Fed to banks, a half point to 3.5% .

As they have with each rate reduction this year, the central bankers warned the economy faces a risk of continued weakness.

Since the first of the year, the Fed has reduced its target rate 2-1/2 percentage points, the most aggressive period of rate-cutting ever by the Alan Greenspan-chaired Fed.

The Fed cuts rates to encourage the nation's biggest banks to cut their own interest rates, making money more readily available to consumers and businesses in the hope that they'll spend more to boost the economy. Commercial banks are expected to trim borrowing costs for consumers and businesses immediately to boost the economy.

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Tim Parry

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