Fed Unexpectedly Lowers Interest Rates
September 17, 2001
In an unexpected move Monday morning, the Federal Reserve cut key interest rates just before U.S. financial markets reopened for the first time following last week’s terrorist attacks on America.
The Federal Open Market Committee cut the federal funds rate for the eighth time this year, from 3.5 percent to 3 percent, while the Board of Governors cut the discount rate from 3 percent to 2.5 percent. The Fed was not scheduled to meet until Oct. 2.
In making the announcement, the Fed issued a statement saying it "will continue to supply unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored.”
The Fed also noted that the U.S. economy was precarious before last week’s terrorist attack and noted there is greater risk for economic problems now.
In their statement officials also said, “Even before the tragic events of last week, employment, production, and business spending remained weak, and last week's events have the potential to damp spending further. Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate.
"For the foreseeable future, the Committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness.”