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Fed funds rate now at 3.75%

WASHINGTON - With the latest rate cut, the federal funds rate stands at 3.75%, the lowest it has been since 1994. This time it was only a quarter point cut, a departure from the recent string of half-point cuts. Big banks almost immediately slashed their prime rates from 7% to...

By Staff Writer | Updated on July 03, 2001

WASHINGTON – With the latest rate cut, the federal funds rate stands at 3.75%, the lowest it has been since 1994. This time it was only a quarter point cut, a departure from the recent string of half-point cuts. Big banks almost immediately slashed their prime rates from 7% to 6.75%. “The one thing that I think is new from this cut is credit unions are going to have to do something that they’re reluctant to do, which is lower core deposit account rates,” said CUNA Chief Economist Bill Hampel. “A lot of credit unions probably have been dragging their feet lowering regular core deposit rates, but with as much as it’s down over the last four months, they’re going to have to lower them or their net income will fall off,” said Hampel. Hampel said credit unions generally resist cutting deposit rates, but they may not be able to any more. “The Fed has indicated that they are going to be abandoning the 50 basis point cuts for 25 basis points. I expect another 25 at the August meeting. They’re also letting the market know that the cuts are slowing down, and they’re going to take a look at how the first cuts are affecting the economy,” said NAFCU Economist Jeff Taylor. With rate cuts taking about six months to affect the economy, Taylor said the Fed can now see what its January cuts have done for the economy. The Fed did say in its statement that it expects inflation to be held in check. [email protected]

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