Signaling
In August 2007,Committee announced that "downside risks to growth have increased appreciably," a signal that interest rate cuts might be forthcoming. Between 18 September 2007 and 30 April 2008, the target for the Federal funds rate was lowered from 5.25% to 2% and the discount rate was lowered from 5.75% to 2.25%, through six separate actions. The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility via the Discount window.
Read more about this topic: Federal Reserve Responses To The Subprime Crisis