Fed Cuts Fed Funds, Discount Rates by 50 Bps

The Fed also cut the discount rate by 50 basis points, to 5.25%, the second such move since August 17, when the Fed lowered the discount rate to 5.75%, encouraged borrowing from the Discount window, and liberalized lending terms for collateral and lengthening the time such loans are allowed to exist. The Fed has been trying to remove some of the stigma attached to the Discount window, which has been traditionally the lender of last resort, to “generally sound depository institutions that cannot obtain funding in the market on reasonable terms” according to The Federal Reserve Discount Window & Payments System Risk Web site.