"Summer School" series: The Fed & Interest Rates

Ever wonder what the Fed really does when it "lowers interest rates." Well for those in the know it, the Fed, does really lower interest rate, it just lower the rates banks pay in day to day loan, thus putting more money in the system, thus making our interest rates on "regular loans" lower. But there's a catch. Wanta learn more. Listen to this for yourself. Note you'll need Real Player. I'm not a big fan of Real Player, from when they use to track your use, but you'll need it to listen.

Update:

WASHINGTON (AP) - The Federal Reserve cut a key short-term interest rate Wednesday by one-quarter percentage point to its lowest level in 45 years. The aim is to energize consumer spending and business investment and help the economy snap out of a funk.

Fed Chairman Alan Greenspan and his Federal Open Market Committee colleagues reduced the federal funds rate from 1.25 percent to 1 percent, the lowest level since 1958.

The funds rate - the interest banks charge each other on overnight loans - is the Fed's main lever for influencing the economy.

The vote was 11-1 with Fed member Robert Parry dissenting. He favored a larger, half-point reduction in the funds rate.

So now you know all about how the Fed cuts "interest rates", this should all make sense. You'll find the full article here.

On the Net: Federal Reserve: http://www.federalreserve.gov