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 November 02, 2007

Federal Reserve Trims Rate a Quarter Point and Banks Respond
The Federal Reserve Board cut the federal funds rate by 1/4 percentage point down to 4.5% the past Wednesday.
Commercial banks including Bank of America, KeyCorp. , and Wells Fargo announced that in response to the cut they would trim their prime lending rate for certain types of credit cards, home equity lines of credit, and other loan products to a rate of 7.5%

The decrease in these rates typically pushes down rates for first mortgages and refinancing loans.

The Federal policy makers supporting the rate cut agree that the action was needed to forestall some of the adverse effects on the broader economy. There are fears that current housing and credit troubles will continue to wreak havoc on Wall Street.

Previously, Federal policy makers stated that the rate cut that took place in September should be sufficient to roughly balance any risk to the economy from inflation.

Economists are interpreting that statement to imply that the Federal Reserve will leave the funds rate unchanged when it next meets on December 11, which will mark the final session of 2006.

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