Fed interest rate cut seen this week

(From L to R) Greenspan, President Bush, Bernanke

Looks like we’re in store for some good news this week…Lesley

 By JEANNINE AVERSA, AP Economics Writer

For the first time in more than four years, the Federal Reserve appears ready to lower interest rates to prevent a housing meltdown and a painful credit crunch from driving the economy into a recession.A rate cut would affect millions of borrowers, with the intention of getting them to spend and invest more, which would revitalize the economy.In one of their most important and anxiously awaited decisions, Fed Chairman Ben Bernanke and his central bank colleagues meet Tuesday to determine their next move on interest rates. Those policymakers are widely expected to cut an important rate, now at 5.25 percent, by at least one-quarter of percentage point. Some analysts predict a bolder step, a half-point reduction.

If the Fed drops the rate, then the prime lending rate that commercial banks charge many individuals and businesses would fall by a corresponding amount. It now is at 8.25 percent.

Should the Fed go with a quarter-point cut, analysts expect policymakers will lower the rate again in October and in December, their final meeting of the year.

Fed action would mean that borrowers who can obtain credit would see rates drop on a variety of loans. It would become less expensive for people to finance certain credit card debt and for homeowners to take out popular home equity lines of credit, which often are used to pay for education, home improvements or medical bills.

Also, it should help some homeowners whose adjustable-rate mortgages reset in the fall.

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On the Net:

Federal Reserve: http://www.federalreserve.gov/

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