The United States Federal Reserve has made a cut in the key interest rate yet again. This is the tenth cut in the last fifteen months. This time the cut is between zero percent and 0.25 percent. It is a record of sorts for the Fed has never gone below 1% earlier. On Tuesday it had been a bad day when the US labor department reported a loss of 1.7% in the consumer price index.
The consumer price index is vital to the health of an economy. It is the main measure of the rate of inflation and sets guidelines to balance it. This sets off the lending rates for various loans ranging from mortgage loans to business loans. It also affects credit cards, and home equity lines of credit. It is invaluable when it comes to controlling the economy. Used judiciously it can play the dual role of slowing and accelerating the economy. It can both spur and slow the growth and spending. When it lowers the lending rates are relaxed to encourage spending. The higher rates keeps prices in check.
This drastic unprecedented cut has however sent the legal financial experts into a tizzy. There is very little scope to manipulate if the recession continues and the economy does not perk up. This cut by the United States Federal Reserve has had its impact on the banks too. They have cut down their prime rate to 3.25%. It is imperative at this point for the economy to show signs of revival.
