Fed Cuts Interest Rates Again

As expected, the Federal Reserve cut U.S. interest rates by a half-percentage point on Tuesday, and hinted it was poised to lower rates further if the economy continues to stall.

Following the fifth cut of 2001, the Fed said that it still sees economic weakness as the main threat to the economy.

Financial analysts who follow the trucking industry note that any rate cut can immediately reduce monthly interest expenses for some trucking operations, if they carry large floating-rate debt on their equipment.

This move leaves the federal funds rate, a benchmark for short-term rates throughout the economy, to 4% percent, its lowest level in seven years. During the past 10 years, the rate has gone as low as 3%, from September 1992 until February 1994.

The central bank also chopped the discount rate -- charged on direct Fed loans to commercial banks -- by a half point to 3.5%.

While the Fed seems ready to do more, analysts are pointing to signs such as a rise in gross domestic product, retail sales and factory orders as evidence the economy is picking up, and may not need more cuts, Bloomberg noted.

However, manufacturing remains in a slump, as industrial production fell in April for the seventh straight month, and the amount of industrial capacity in use fell to the lowest point since the end of the last recession.

That is especially bad news for trucking companies, because the manufacturing sector is their biggest customer group.

Bloomberg also said that never before has Fed Chairman Alan Greenspan engineered so large a reduction in so short a time, including the 1990-91 recession.