Fed Lowers and Banks Raise?

Question: Is is true that when the Federal Reserve lowers their rate that banks raise their interest levels? Answer: No. The Federal Reserve sets the "discount" and "federal funds" rates, rates which impact the cost of borrowing for banks. When the Fed raises rates then banks raise their prime rates, when the Fed lowers the discount and federal funds rate then the prime rate and other rates decline. The exception is credit card rates, which are routinely unrelated to any understandable measure or cost.