Fed Expected to Cut Key Interest Rate Tuesday

Fed Expected to Cut Key Interest Rate Tuesday

The Federal Reserve begins a two-day meeting today where it is expected to cut it's key interest rate, perhaps to an all-time low. The Fed will likely announce Tuesday that it is cutting its key rate in half to just 0.50 percent. However, a few economists predict the Fed will go even further and cut the rate to one-quarter of a percentage point.

If that happens, it will be the lowest rate on record going back to 1954, when records tracking the monthly rates were first kept.However deeply the Fed decides to cut rates, the prime rate for many consumer and small-business loans would drop by a corresponding amount. The prime lending rate, currently at 4 percent, is used to determine rates on home equity loans, certain credit cards, and certain consumer loans, the Associated Press reports. "It is not so much going to give the economy a big push forward. It's more a case of trying to help the economy from being pushed further backward by all these negative events," said Stuart Hoffman, chief economist at PNC Financial Services Group.

Source: The Associated Press (12/14/12008)