It's 50 Basis Points This Time: The Wall Street Journal Prime Rate Is Set To Drop by 0.50 Percentage Points!

A 4.25% Prime Rate and It's Not Even My Birthday! Wow!

With no change to the target rate since December of 2001, the Fed today voted to lower their fed funds target by 50 basis points (or 0.50 percentage points.) The Fed Funds Rate is now 1.25%, and, by tomorrow, or perhaps the next day, The published Wall Street Journal Prime Rate will be lowered to 4.25%. This means, of course, that anyone shopping for a mortgage, mortgage refinancing, a new car or a new fixed rate credit card will be able to secure some truly excellent deals, no doubt!

How low will The Fed go? Who knows!? But one thing is for certain: if you'll be shopping for any big ticket items this month, there'll be a lot less guilt attached to that spending, thanks to the decisions made by The Fed today.

A snippet from today's press release by The Federal Open Market Committee (FOMC) follows:

"The Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 basis points to 1 1/4 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate to 3/4 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with still-robust underlying growth in productivity, is providing important ongoing support to economic activity. However, incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment. Inflation and inflation expectations remain well contained.

In these circumstances, the Committee believes that today's additional monetary easing should prove helpful as the economy works its way through this current soft spot. With this action, the Committee believes that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are balanced with respect to the prospects for both goals in the foreseeable future."

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