The Federal Reserve slashed key interest rates again yesterday in an attempt to subdue the economy's growing turmoil. The Federal Open Market Committee announced a three quarters of a percent drop in the Federal Funds rate, to 2.25%. 
The Discount Rate and the Prime Rate were also slashed three-quarters of a percent, to 2.5% and 5.25%, respectively. Home equity lines of credit, which are attached to the prime rate, will drop as well. Yesterday's cuts mark the sixth time in six weeks in which the Fed has lowered interest rates. And although the cuts were lower than expected, investors worry the string of rate cuts could send mortgage rates higher as inflation uncertainty increases. "There is a long disconnect between the fed funds rate and fixed mortgage rates," said Keith Gumbinger, vice president of publisher HSH.com. Borrowers need to be aware that fixed mortgage interest rates often rise after the Fed has cut short-term interest rates. For a graphic representation of the correlation between the Fed Funds and mortgages, Click here. (Written by: K. Skowronski) Article Sources Fed Cuts Key Interest Rate by 3/4 of a Point, NYtimes.com. Amid Market Dysfunction, a 3/4-Point Rate Cut, HSH Financial Publishers Fed Slashes Rate to 2.25%, Bank Rate A Fed rate cut could send some mortgage rates even higher, CNN Money
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