The Federal Reserve drops interest rates another half point

The Federal Reserve dropped interest rates a half a percentage point today. The Federal Funds rate was slashed from 3.5% to 3.0%. This latest decrease comes after a three quarter point decrease just last week from 4.25% to 3.5%. The January 22 decrease was the first inter meeting rate change since 2001 and the largest since 1984. Since last fall the Fed has lowered the rate from 5.25% down to the now 3.0%.

The Federal Reserve has stated that financial markets are under stress and the committee was acting in a timely manner to address risks. That same committee also reassured investors it will act as needed in the future.

The Federal Reserve is acting in an attempt to prevent a possible recession. Growth in the U.S. economy slowed sharply in the fourth quarter as consumers decreased spending and the real estate downturn accelerated. The Commerce Department said gross domestic product grew at an annual rate of .6 percent for the fourth quarter, the slowest rate in five years.

Borrowers and businesses are likely to see their cost of borrowing decrease as a result of the Federal Reserve move. Commercial Banks are expected to lower their prime interest rate by half a percent, from 6.5 percent to 6.0 percent. The prime rate applies to credit cards, home equity lines of credit and other mortgage loans. The Fed funds rate and the prime rate are now at three year lows.

Which it makes it more imperative then ever to really look at either buying, with real estate pricing down, or at refinancing your mortgage to get really the best mortgage rates in years.