As the US and global recession deepens, the monetary authorities in the UK, the EU and the US are driving interest rates to record low levels. Today the FED cut the Federal Funds rate, the overnight lending rate to banks, to a range of zero to 0.25 percent which is the lowest rate on record. The action is an effort to make holding cash by banks so disadvantageous that they are tempted to begin lending in order to earn a return. The action is meant to increase the money supply, an action which is deemed safe now since its primary danger (inflation) appears as no immediate threat due to slumping demand and rapidly falling prices for everything from housing to gasoline.
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