This afternoon, the Federal Reserve announced the seventh rate cut since it began slashing interest rates last September.  It lowered both the benchmark federal funds rate as well as the discount rate by 25 basis points to 2% and 2.25% respectively.

The Commerce Department also released economic data which showed that GDP had slowed in the first quarter to a 0.6% annual growth rate.  In a press release, the Fed acknowledged the worsening of the economy despite it’s recent efforts.

Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.

In a sign that the credit crisis may be easing somewhat and that inflation remains a concern, it was the smallest rate cut the Fed instituted this year.  While core inflation has slowed recently, energy and food prices have continued to skyrocket.

Some economists have been critical of the Fed for lowering interest rates to the point that short term Treasury yields are now below the rate of inflation which causes a disincentive to saving.  Still, many analysts believe that this will probably be the last rate cut we see for some time unless credit conditions worsen again.

The Fed will most likely wait and see what impact the economic stimulus package has on consumer spending before making any further moves.  Rebate check began going out to households earlier this week.

The economic stimulus money is going to start going out to consumers today.  This is a bit earlier than planned, as it was supposed to begin in May.  Direct deposits will be issued starting today, and all of those receiving tax rebates by mail will receive them after May 9, 2008.  This is a week earlier than originally planned.

The original intent of the economic stimulus package was to boost consumer spending, which would ultimately give the economy a boost.  After all of the inflation in commodities like food and gasoline, this package could end up covering additional expenses, rather than offering extra savings.  The price of oil is continuing to rise steadily, and $4 per gallon looks to be a strong possibility this summer.

The economic stimulus package will vary from household to household.  Single individuals who earn at least $3,000 last year should receive $600.  Married couples will be given $1,200.  There will also be $300 alloted to dependent children. Only those who filed a 2007 tax return as required are eligible.  Individuals who don’t have to file are also eligible.  The IRS has set July 11th as the deadline for all rebates to be received by consumers.  Those who filed a late return may have to wait longer.  Individuals earning more than $75,000 and married couples earning over $150,000 will no be receiving any of the stimulus money.

Additional money will temporarily help most individuals who are having minor financial problems while budgeting against inflation.  It can also provide some relief for unemployed individuals.  Most consumers will probably be using the money to help pay debts or save the money for future bills.

Bush admits to economic slow down, but will not call our economic state a recession.  Economists disagree with that assessment.   We are in a recession.  Some might call it tough times, but, I am pretty sure this is a recession.

Use the money to your advantage.  If you have debt, put the money towards that.  If you are struggling with rent, grocery bills, or gas, use the money for that.  If your bills are caught up and you aren’t having a hard time with inflation, put the money in an interest bearing account and use it when inflation starts to hit you.  Sooner or later, the way things are going, you will have to use the money.  Spend it wisely.

The Euro has begun to lose a small amount of value against the dollar after its record high of $1.6019 earlier this week.  The euro traded at $1.5685 late yesterday.

The dollar gained a small bit of value against Japanese currency.  The dollar is worth 104.63 yen.  This is up from the value of 104.22 yen earlier this week.

The British pound is now trading at 1.9763 dollars.  Swiss francs are trading at 1.0349 dollars.

The Euro has remained strong against the dollar for several years, with its strength increasing during the US rate cuts made by the Federal Reserve.  Since September of last year, the US Federal Open Market Committee has reduced the discount rate and the federal funds rate repeatedly.  This has opened the door for inflation problems and weakened the strength of the dollar.

The European Central Bank has primarily focused on keeping inflation under control as much as possible, and has chosen to keep their interest rates the same.  The primary focus of the US Federal Reserve Board has been to stimulate economic growth and increase liquidity in the markets to combat recession and a major credit crunch.

Experts speculate that the Federal Reserve will make at least one more modest rate cut in light of the inflation problem in the US.  With inflation creating pressure on the FOMC, rate cuts will continue to be a difficult decision.

Meanwhile, according to the University of Michigan, consumer sentiment has decreased to its lowest point in nearly three decades.  Gas and grocery prices are steadily increasing nationwide.  The unemployment rate has risen beyond 5%, nearing 8 million people without jobs.

The economic stimulus package will be sent out early next week, and eligible consumers should see the checks for an amount between $300-$600 per person.  Hopefully, the plan will work to give the economy a small boost over the course of the year.