1553 - For the 10th time this year the Federal Reserve has lowered short-term interest rates. The federal funds rate was reduced by 50 basis points to 2 percent. This is the overnight lending rate charged to banks and the lowest rate since September 1961, 40 years ago when John Kennedy was first at the White House. In response, several banks immediately reduced their "prime" rate to 5 percent, down from 5.5 percent. The Fed expands and contracts the nation's money supply in an effort to moderate both inflation and recession. By lowering rates, the Fed creates incentives for companies to invest, expand and hire. But while the Fed can change rates in minutes, the impact of such changes is gradual. It takes time for discount-rate changes to filter through the economy, months rather than weeks or days. Because the of the time lag, the Fed seeks to anticipate national trends by changing rates before the economy drifts into either an inflation or recession. The problem, of course, is that we do not know with certainty just how much inflation or how much recession to expect. The result is that the Fed often makes a series of rate changes rather than a huge, lump-sum reduction in an effort to fine-tune the economy. Read this Nemmar Real Estate Training article at Mortgage Loans, Finance, Economy, Appraisal