Federal Reserve cuts interest rates to just above zero
On Tuesday, the Federal Reserve made an unprecedented move and cut interest rates from 1% to between zero and 0.25% as it tries to fight the country’s recession. In a statement, the Federal Reserve said that “the outlook for economic activity has weakened further”. It also predicted that the rates would stay at low levels for the foreseeable future.
Most analysts are calling the new interest rate virtually zero, with the Bank of America’s European economist Holger Schmieding saying, “Whether it’s zero or 0.25% actually does not make a huge difference”.
Mr Schmieding went on to say that it was now up to policy makers to help the economy as interest rates cannot be cut anymore.
Since September 2007, the Federal Reserve has slashed interest rates from 5.25% to its current level, and now also has the risk of deflation, which becomes more of a threat as the rate approaches zero.