Wednesday, December 17, 2008
Interest Rates-How low can it Go?
Key Interest Rate as low as it can go
The Federal Reserve on Tuesday lowered its benchmark federal funds rate to a range or zero to 0.25 percent and said it would likely keep rates low for an extended period.
"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said.
The Fed also said it was prepared to purchase more debt issued or guaranteed by Fannie Mae, Freddie Mac and other government-sponsored mortgage agencies. And it said it is considering purchases of longer-term U.S. Treasury debt.
"The focus of the committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level," it said.
Michael Woolfolk, senior currency strategist, at the Bank of New York-Mellon, applauded the Fed’s approach. "We think it's the best possible move for the U.S. consumer and for the financial market," Woolfolk said.
Source: Reuters News, Mark Felsenthal (10/16/2008)