From MarketWatch:

WASHINGTON (MarketWatch) — Hoping to halt a market meltdown and prevent a recession, the Federal Reserve lowered its overnight lending rate by three quarters of a percentage point to 3.50% on Tuesday in a rare move between formal meetings.
 
The 75 basis-point surprise cut came after global financial markets sold off in dramatic fashion on Monday on fears that bad bets in credit markets could spread further and drive the U.S. economy into recession.
 
“The committee took this action in view of a weakening economic outlook and increasing downside risks to growth,” the Federal Open Market Committee said in a statement. (See Federal Reserve press release for full statement)
 
The Fed also lowered its discount rate by 75 basis points to 4%.
Here is a chart showing the historical trend of the Federal Fund Rate from 1957 to today.

Federal Fund Rate Historical Chart

If you are interested in federal fund rate volatility and it’s effect on the economy, the Federal Reserve Bank of New York published a paper in July 2005 that discusses it in somewhat painful detail.
 

Dan Green explains why this drop in the Fed Fund Rate won’t have much impact on mortgage rates.

 

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