USFeds Interest Rate Reductions
The United States federal government keepsshaving away at it but after the seventh cut of the interest rateon loans this year, businesses appear no more eager to borrow.
The unusual aspect of the behaviour of theUS economy is that although the regularly reducing interest ratesset for repayment of loans appears to be ignored by all indicationsare the slide might have ended, or is getting there.
Media reports point to reducing unemploymentnumbers, reducing factory inventories, and increasing housingstarts all signs that the economic bottom was reached andthings are on the rebound.
So now that Chairman of the Federal Reserve,Mr Allan Greenspan, announced this of 20 August to 24 August thatthe interest rate has been lowered again from 3.75 per cent to3.50 per cent there appears more cause for ignoring it.
Following is a statement released by theUS Federal Reserve announcing the cut in interest rates.
"The Federal Open Market Committeeat its meeting today decided to lower its target for the federalfunds rate by 25 basis points to 3-1/2 percent. In a related action,the Board of Governors approved a 25 basis point reduction inthe discount rate to 3 percent. Today's action by the FOMC bringsthe decline in the target federal funds rate since the beginningof the year to 300 basis points.
"Household demand has been sustained,but business profits and capital spending continue to weaken andgrowth abroad is slowing, weighing on the U.S. economy. The associatedeasing of pressures on labor and product markets is expected tokeep inflation contained.
"Although long-term prospects for productivitygrowth and the economy remain favorable, the Committee continuesto believe that against the background of its long-run goals ofprice stability and sustainable economic growth and of the informationcurrently available, the risks are weighted mainly toward conditionsthat may generate economic weakness in the foreseeable future.
"In taking the discount rate action,the Federal Reserve Board approved requests submitted by the Boardsof Directors of the Federal Reserve Banks of Boston, New York,Philadelphia, Richmond, Chicago, Kansas City and Dallas."
With this latest drop in the US rate, CaymanBanks traditionally will follow offering three percent above theNew York prime, which will see mortgage rates being calculated9.5 percent the lowest in decades.