Jan
I read about it all the time and all that happens is that the interst rate in my moneymarket and savings account goes down. Can someone explain what is happening?
Answer:
It means the Federal Reserve Bank (not affiliated with the US government) charges US member banks less to borrow. Banks can then offer lower rates loans, or refi to help get them out of this mess.
Rates on CD's money market, etc, also fall as bank interest rates drop.
The idea that lower rates does tend to stimulate the economy. It is not a silver bullet however.
The FED cut rates exactly as the Bond market expected. The FED has been behind the 10 Year Treasury Yield Curve. I know, a mouth full.
What that means is the 10 Year US Treasury has priced in lower rates and the FED MUST drop rates at the 10 Year Treasury rate to reduce the length of a recession.
If the FED dropped rates by 125 basis points (1.25%) in a day, that would signal a "panic" by the FED and the stock market would tank - possibly a mini crash for a day.
Class dismissed 
Answer:
It means they're further debasing the money.
Their theory is that this "frees up" money so people will go out and spend AND also right now since so many people foolishly took ARM mortgages that this is dropping their rates.
This is what happens with "fiat currency" and a centralized bank–kids play with money without understanding the ramifications and the working man pays.
Answer:
When the Fed cuts “rates” it lowers the Fed Funds rate, which is the interest rate charged to banks for overnight loans to meet reserve requirements (this is a capital requirement set by the Fed to help ensure that banks do not become insolvent). Lowering the Fed Funds rate has a trickle down effect on most/all other interest rate. What happens is this: when banks can borrow cheaply from the Fed to replenish reserves, they lend out more money to consumers who use the proceeds to buy houses, cars, and other goods and services that stimulate the economy. Thus lowering rates helps to stave off an impending recession. Book Mark it-> del.icio.us | Reddit | Slashdot | Digg | Facebook | Technorati | Google | StumbleUpon | Window Live | Tailrank | Furl | Netscape | Yahoo | BlinkList