In a bold move to stabilize various credit markets, the Federal Reserve dropped the discount rate to 3.25 percent over the weekend and expanded it's roster of banks and financial institutions that can borrow money at that rate.
The Federal Reserve Board's Open Market Committee is expected to slash the federal funds overnight rate, which is currently 3 percent, when it meets Tuesday. Many speculate a 50 to 75 basis point drop. In all likelihood we may see a 100 point drop to a staggering 2 percent.
Although the federal funds rate and the discount rate are short-term interest rates that do not directly influence rates on fixed-rate, long-term mortgages, some adjustable-rate mortgage (ARM) loans are tied to the discount rate.
Next month, you can definitely expect a lower rate on your credit cards, lines of credit and student loans!