December 16th, 2008
09:51 AM ET

Fed action expected today

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/16/art.fed.meeting.jpg caption="The Fed began its last meeting of 2008 today, where it is expected to announce another reduction in the key interest rate."]

Ali Velshi | Bio
CNN Chief Business Correspondent

The Federal Reserve is widely expected this afternoon to cut interest rates for the 10th time in just over a year, driving the rate it controls close to zero as it continues the most sweeping effort to stabilize the economy in the history of the central bank.

The federal funds rate, at which banks lend to each other, is already at 1 percent. The Fed is expected to drop it to half a percent, or even lower, at the end of its policymaking meeting today. That would be the lowest U.S. rate on record.

Here are some bullet points:

The Fed's extraordinary measures to calm the economy:

  • Cut interest rates
  • Inject funds into system
  • Buy up short-term debt
  • Bail out financial firms

Why does a rate cut matter?

  • Money is cheaper to borrow
  • Businesses expand, hire more
  • People save on lower rates
  • Consumers able to spend more

Interest rates right now:

  • Fed Funds Rate: 1.0%
  • Prime Rate: 4.0%

Filed under: Ali Velshi • Economy • Finance • U.S. Federal Reserve
soundoff (5 Responses)
  1. john rogan

    The man who threw his shoes at the prez is not only a hero to the people of Iraq, but is also a hero to many Americans and many others all around the world. It's amazing to me that these type of stories are so well publicized and the UFO phenomena gets very little publicity. We can learn a lot from civilizations that are advanced enough to visit our planet, but will have a hard time doing so as long as our policy is to harass them instead of embracing them. If every time the U.S. sent a ship load of aid to Haiti the Haitians fired upon the ship or chased it out of their waters the haitians would never benefit from our generosity.

    December 16, 2008 at 1:39 pm |
  2. Babar Nisar

    Are these Fed rate cuts really working? for past many months there is only news I hear that fed is cutting rate and still econonmy is not picking up, its look like economy engine is siezed. Why don't Goverment ease on income tax (5 to10%) so people get little bigger pay check and lower sales tax (1 to 2%) for a while, because when people will have more money in there pocket give lower sales taxes then they will spend more in the market, obviously Government will get this back later. Right now people are afraid to spend money, we have to give them a confidence so they will spend more money and help in mobilizing the economy.

    December 16, 2008 at 1:39 pm |
  3. Maria

    Happy day Ali,
    So far it is green at Wall Street and I wish it will last. I agree with you on that cutting the interest rate will stimulate the economy, but reaching 0% after 10 constitutive cuts in a year means something fundamentally wrong in the whole formula.

    December 16, 2008 at 12:48 pm |
  4. earle,florida

    This post probably has nothing to do with todays Fed cut. It's literally a precurser to how we've become so dependent upon this non-functioning entity. The Federal Reserve was created on Dec. 23,1913 with the signing of the Federal Reserve Act [( Section Titles 1-31)/ (ie.24A conditions of investment)] by President Woodrow Wilson. Ironically, this "Act " was drafted by US Rep.(D-VA.) Carter Glass. Now,let's tie the Fed to the "Gold Standard",the monetary standard of the world. Let's look back at President Nixon's Administration. With an election on the horizon,Nixon chose to sever the dollar's linkage to the "Gold Standard",[our monetary standard (Fed Chair A. Burns) since our countries inception] on August 15,1971! Needless to say the quick fix worked (Nixon got elected),just like today,that is inflation can be tweaked, but has, "Never Been Tested Up Against Deflation" ,the current situation we are in now in the United States. My argument is (I don't want to go off on a tangent) that the Federal Reserve is a waist of taxpayers money,and is passe as a guardian of our monetary polycies. Since the" Fed & Gold Standard" changes our country has been on a downward spiral every decade like clockwork,and soon to be a"Death Spiral" if the powers to be remain complacent.

    December 16, 2008 at 11:32 am |
  5. Max

    I can think of a few other THINGS that should be CUT permanently.

    December 16, 2008 at 9:58 am |