Fed cuts rate by half-point to 3 percent

By Holden Lewis • Bankrate.com

For the second time in just over a week, the Federal Reserve has lowered short-term interest rates. This time, the move was widely expected.

The central bank's Federal Open Market Committee reduced the target federal funds rate half a percentage point, to 3 percent. This affects consumers because the prime rate will fall half a point, too, to 6 percent. Variable-rate credit cards and home equity lines of credit are linked to the prime rate, so they will fall another half-point over the next couple of billing cycles. The Fed's rate cut is designed to get consumers borrowing and spending again.

The central bank also reduced the discount rate by a half-point. The Fed charges the discount rate on direct loans to member banks.

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