FED Drops .75%

The U.S. Federal Reserve cut its key lending rate by three-quarters of a point, which isn't as deep as some analysts had been expecting.

CTV.ca News Staff

U.S. Federal Reserve Chairman Ben Bernanke pauses as he speaks at the National Community Reinvestment Coalition's annual conference in Washington on Friday, March 14, 2008. (AP / Pablo Martinez Monsivais)

"Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity," the Fed said in a statement issued Tuesday.

"However, downside risks to growth remain. The committee will act in a timely manner as needed to promote sustainable economic growth and price stability."

The federal funds rate, which is what banks charge each other for overnight loans, had been three per cent. Tuesday's cut reduces that to 2.25 per cent. The Bank of Canada's equivalent is 3.5 per cent.

The U.S. rate is now at its lowest point since 2004.

Stock markets lost some steam after the announcement.

Thanks,

David Kendall
Senior Mortgage Consultant