The Federal Reserve and six other major central banks from around the world slashed interest rates today in an attempt to prevent a mushrooming financial crisis from becoming a global economic meltdown.
The Fed reduced its key rate from 2 percent to 1.5 percent. In Europe, which also has been hard hit by the financial crisis, the Bank of England cut its rate by half a point to 4.5 percent and the European Central Bank sliced its rate by half a point to 3.75 percent.
Also cutting rates were the central banks of China, Canada, Sweden, and Switzerland. The Bank of Japan said it strongly supported the actions.
"The recent intensification of the financial crisis has augmented the downside risks to growth," the Fed said in explaining the coordinated action.
The Fed action will reduce borrowing costs almost immediately for U.S. bank customers whose home equity and other floating-rate loans are tied to the prime interest rate. Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent after the Fed announcement.
(source: Associated Press)
If you’re thinking about buying a home or refinancing and you’re not sure how this will affect your interest rate, please contact me.