Fed Cuts Rate Half-Point to 1%

The Federal Reserve surprised no one today, cutting interest rates by half a point, to 1%—as investors widely predicted he would, AP reports. “The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures,” the Fed said in a statement, with the financial crisis “likely to exert additional restraint on spending.”

Though the move takes the target rate to 1%, its lowest since 2004, some say the effect may be slight, because the Fed is now paying banks interest on excess reserves deposited at the Fed. “The Fed funds rate is almost irrelevant,” said one economist. “The easing has already taken place.” Another economist disagreed. “As long as there are benefits,” he argued, “they’ve got to keep trying.” (More Ben Bernanke stories.)