Industry News

Fed cuts federal funds, discount rates again

25-basis-point cuts less severe than last month

The Federal Reserve today lowered its target rate for the federal funds rate to 4.5 percent and slashed the discount rate to 5 percent. The 25-basis-point reduction in both short-term rates was less drastic than similar action the Fed took last month as a response to financial market disruption stemming from losses in mortgage lending, but was in line with many analysts' expectations. On Sept. 18, the Fed slashed 50 basis points off both the federal funds rate -- the rate banks charge each other for overnight loans -- and the discount rate, the rate the Fed charges for direct loans to banks (see Inman News story). Mortgage Bankers Association Chief Economist Doug Duncan said earlier this month he anticipated a 25-basis-point reduction in the federal funds rate in October, and predicted it could be the last adjustment needed to reach a "neutral" position that allows for moderate growth while keeping inflation in check. In a statement announcing today's decision, members of...

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