Six weeks after the Federal Reserve Board held its emergency weekend meeting, the FOMC signaled a possible end to lowering the Fed Funds rate for now. The FOMC lowered nation's primary interest rate to 2%, and the discount rate .25 points to 2.25%.

The Federal Reserve is now less concerned about recession than it is about inflation. Since the Q1 GDP report was .6%, and not negative, the Fed's realizes it may not need to continue with expansionary monetary policy for much longer. (Source: FOMC statement, 4/30/08)

What It Means to You

The Fed's actions have helped to keep adjustable-rate mortgages affordable, although banks are still not willing to lend without FHA guarantees. Furthermore, the Federal tax rebate checks have been mailed, adding further stimulus to the economy. (For more about receiving your check, see The 2008 Tax Rebate Checks from Robert Longley, Guide to the U.S. Government).

A lower Fed Funds rate puts downward pressure on the dollar, which increases inflation in imports, especially oil prices which are denominated in dollars.

Investors in the stock market are encouraged by the Fed's action. The Dow rose above 13,052, closing down to 12,820 after the FOMC announcement. On Thursday, the Dow again rose over 200 points as traders further digested the news.

Related Reading

• A Primer on Current Federal Reserve Interest Rates
• Fed Lowers Discount Rate...What Does It Mean?
• Historical Fed Funds Rate
• A Primer on the Subprime Mortgage Crisis
• 2007 Banking Liquidity Crisis
• Dollar Decline or Dollar Collapse?