This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fed Cuts Key Rate by Half Point to 1%

Stocks in this article: JPM BAC GS

Updated from 2:19 p.m. EDT

The Federal Reserve dropped its benchmark interest rate target by 50 basis points to 1% on Wednesday, a widely anticipated move intended to help free up the credit markets.

The Fed funds rate target is now 1%, the lowest level in more than four years. In announcing its decision, the Federal Open Market Committee cited a drop in spending by consumers and businesses, and predicted that consumption may slow further due to tighter lending standards.

"The pace of economic activity appears to have slowed markedly," the FOMC said in a statement, "owing importantly to a decline in consumer expenditures."

Consumer spending accounts for roughly two-thirds of the U.S. economy, and the spread of financial turmoil across the globe "is damping the prospects for U.S. exports" as well, the FOMC noted. All nine Fed governors joined Chairman Ben Bernanke to vote in favor of the rate cut. They also unanimously approved a 50-basis point cut in the discount rate to 1.25%. The Fed funds target affects lending among banks, while the discount rate is what banks pay in exchange for direct loans from the government.

The latest drop in rate targets comes after the central bank and several of its global peers, including the Bank of England and European Central Bank, enacted a 50-basis-point cut on Oct. 8. Since the Fed began a rate-cutting campaign, the funds rate target has dropped 425 basis points, from 5.25% in mid-September of 2007.

The futures market on Wednesday morning had been "priced fully" for a 50-basis point cut with "very low odds" on a 75 basis-point cut, according to Tony Crescenzi, chief bond market strategist at Miller Tabak + Co. Doug Roberts, chief investment strategist at Channel Capital Research, says that while some were predicting a smaller, 25-point cut, "50 basis points was the right number."

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,617.44 +260.57 1.50%
S&P 500 2,038.50 +25.61 1.27%
NASDAQ 4,708.0940 +63.7820 1.37%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs