Fed Cuts Rates by 25 Basis Points

June 27, 2001 (PLANSPONSOR.com) - As widely expected, the Federal Reserve has cut short-term US interest rates a quarter percentage point to try to spark the nation's economy.

The Fed action brings the federal funds rate overnight bank lending rate down to 3.75%, and the more symbolic discount rate on Fed loans to banks down to 3.25%.

“The patterns evident in recent months – declining profitability and business capital spending, weak expansion of consumption, and slowing growth abroad – continue to weigh on the economy,’ the Fed said in a press release. “The associated easing of pressures on labor and product markets are expected to keep inflation contained.”

The Federal Open Market Committee (FOMC) action brings the decline in the target federal funds rate since the beginning of the year to 275 basis points. It was the sixth rate cut this year. The federal funds rate is now at its lowest level since April 1994.

Most observers were expecting a quarter-point rate cut, although many had hoped the Fed would have acted more aggressively to bolster economic growth by cutting rates by half a point.