Title: Fed cuts target for key rate to record low

" This afternoon the Federal Reserve slashed two key interest rate. The federal funds rate now stands at one quarter of a percentage point that is the lowest level on record. Many analysts had expected the Fed to make a smaller cut two point 5%. The Fed pledged to use all available tools to combat the severe financial crisis and prolong six recession. Joining me now to talk about the Fed's decision is John Morris from crest would advisers welcome John."

" you really astonishing I guess you could say that in fact. That the rate could be zero thats essentially exactly right this is what the implied rate is. There's no cost of capital there for banks lending and to the Fed funds rate. So I mean the cynic might say so money is worthless as of today and hunt that you could almost say that I think in the you know cynical oral or. Objective but what the Fed is basically saying is. We're in a very serious recessionary environment this is that inflation is no longer a factor in fact it's continuing to climb into that with oil prices obviously. And so that this is really the last. Heroin their quiver for monetary policy they can't take the Fed funds rate any lower so now it's all about open market policies you know essentially this is not that he's not really great news is. No it's not it's certainly a reflection of the reality of the present economic circumstance which is not an attractive one. So far they've been nine rate cuts in the prior fourteen months one point four trillion dollars in emergency lending. And we're still in deep trouble. Right the -- the appearance of with so many cuts that they really they can't quite get ahead of this issue and now they've exercise all their monetary. -- if you will and end and so the reflection is now from here and they mention this in their minutes today. That you know they're going to have to take other actions -- assets such as there -- talk now about on thirty year treasuries which would lower obviously long term rates. Promote mortgages they're going to be buying the very aggressively. Asset backed securities mortgage backed securities. They'll be buying a next year auto loans things like that so they're doing everything they possibly can with their balance -- keep printing money. In order to flop -- as much capital out there. To keep -- rates lowest possible it's to promote economic prosperity again John what does this mean to the average consumer. Certainly what we'll see immediately we see we see the rates drop on credit cards and adjustable rate mortgages if those are re setting now. And and for those who have the opportunity to refinance particularly conforming mortgages below 417000. Principal. Those rates are coming down very very quickly so if folks can do that this would freeze up free capital for to reduce their balance sheets they're they're outstanding debt. He said that -- government's going to continue to print more and more money -- so we have no problem we have to read about inflation. It's it's definitely on the longer time horizon not immediately but with all of this new dad in all of this take these expenditures that is certainly going to be as a threat on the on the in the not too distant future."

" All right what but an amazing day -- in the financial world. We -- you join us later on business day for more on the Fed's interest rate decision -- to recap of the day's business news I think."