US Fed cuts rate by 50 bps

The Federal Reserve on Wednesday, October 29, cut a key interest rate by 50 basis points (bps) in an attempt to revive an economy ailing from the most severe financial crisis in recent times.

The central bank slashed its target for the federal funds rate, the interest banks charge on overnight loans, to 1%, a low last seen in 2003-2004. The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.

Further rate cuts would make it very inexpensive for banks to borrow from one another. The Fed is hoping that low rates, along with efforts to increase liquidity, will spur greater lending and borrowing, unfreezing credit markets thereby boosting its economy.