It's been almost a year since the Federal Reserve issued the first of what turned out to be seven rate cuts to deal with the credit crisis.
So why does the economy still seem like it's in a big funk, with banks continuing to suffer?
One of the biggest proponents of the Fed's aggressive rate-cutting spree has an explanation.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech Wednesday that the low federal funds rate of 2% is providing "much less stimulus...than it otherwise would" because of the credit crunch.
The federal funds rate is an overnight bank lending rate that banks charge each other to borrow money. But Rosengren argues that just because banks are charging each other a relatively low rate, this does "not necessarily translate into lower costs to the vast majority of borrowers."
In other words, even though the Fed has slashed the federal funds rate from 5.25% to 2%, many beaten-up banks have nevertheless substantially tightened credit standards for businesses and consumers.
Rosengren said that the rate cuts have "merely offset the tightening in credit conditions created by the financial turmoil that began last summer."
