Fed slashes rate to 2.25 percent

By Holden Lewis • Bankrate.com

Now that the Federal Reserve has cut rates again, this question comes up: What good will it do?

The central bank's rate-setting Federal Open Market Committee cut the target for the federal funds rate by three-quarters of a percentage point, to 2.25 percent.

The prime rate will fall three-quarters of a percentage point, also, to 5.25 percent. Variable-rate credit cards and home equity lines of credit are pegged to the prime rate, so they will drop, too. The goal is to encourage consumers to borrow and spend more to revive the economy. more...