The Federal Reserve has taken another big step in stimulating the economy by cutting the interest rates again by a quarter of a point. This interest rate is the rate in which the banks are charged when they borrow money from the Federal Reserve.

With the housing slump and the prices of oil increasing, the interest rate cut would somehow help homeowners afford refinancing of their homes. Of course, rate cuts like this always trigger a rally in the stock market.

Major banks quickly cut their prime lending rate by a quarter-point, to 7.5%. The prime rate is used as a benchmark for many consumer loan rates, including home equity credit lines. The drop in the prime will mean lower interest costs for consumers whose loans are tied to the prime.

Earlier in the day, the Commerce Department reported that the economy grew at a stronger-than-expected annual rate of 3.9% in the third quarter. Although the housing market showed sharp declines, they were offset by strong exports and consumer spending.

Source: Los Angeles Times