Federal Reserve Board Cuts Discount Rate to 6 Percent / Lowest since 1977

Article excerpt

WASHINGTON (AP) - A reduction in the discount rate to 6 percent from 6.5 percent, effective Friday, was announced Thursday by the Federal Reserve Board.

The cut had been widely anticipated by market analysts, with many expecting it to be even larger.

The last cut, from 7 percent to 6.5 percent, had come April 18 - a move made in concert with the central banks of Japan and West Germany, which also lowered their rates. That move drove the U.S. discount rate to its lowest level in eight years.

The rate was last as low as 6 percent in late 1977 and rose to a high of 14 percent in 1981.

The discount rate is the interest the Fed charges for loans to private banks and is the U.S. central bank's most direct way to affect other interest rates in the economy.

Reductions in the rate often pave the way for drops in other rates throughout the economy, including the prime rate - the rate which commercial banks use as a benchmark for business loans.

It was the third time this year that the Fed has reduced the discount rate in an attempt to stimulate lagging economic growth.

On March 7, the central bank dropped the rate from 7. …