Dramatic interest rate cuts by the Federal Reserve over the last year have largely been ineffective in easing the system-wide U.S. credit crunch, according to statements Wednesday from Eric Rosengren, president of the Boston Fed.

“Many business borrowers and consumers are finding their access to credit has diminished, and their cost of credit has risen, despite the reductions in the federal funds rate,” Rosengren said in prepared remarks.

Led by the collapse of the sub-prime mortgage market last summer, a national credit crunch quickly reduced financing options to investors, small businesses, and home buyers.

As hundreds of thousands of sub-prime borrowers began defaulting on their loans in the middle of 2007, banks and investors lost millions, resulting in many bank failures and a mass withdrawal of frightened investors from the secondary mortgage market.

With few buyers for securitized mortgages and with huge losses from soured loans, banks had less funds to offer interested borrowers, and drastically reduced the availability of sub-prime, or poor-credit home loans.

As the lending industry’s resources contracted, the Federal Reserve moved quickly to lower its own federal funds interest rate, or the rate that banks charge each other for overnight transfers, in order to provide greater liquidity and stimulate more financial activity.

Yet because the credit crunch and investors’ aversion to risk has been so expansive, even slashing the target rate to 2.00 percent from 5.25 percent in the course of a year has not created lower mortgage interest rates or made home loan funding more available.

“During a credit crunch, various constraints on the supply of credit will make market rates less responsive to a lower Federal Funds rate,” Rosengren said. “Indeed… the reductions in the Federal Funds rate have done little but offset some of the tightening occurring in the marketplace in response to the credit crunch conditions.”

Yet several of his fellow Fed governors strongly disagree with the Boston chief. Dallas Fed president Richard Fisher and Jeffrey Lacker of the Richmond Fed have claimed that the 2.00 percent benchmark rate, adjusted for inflation, has  had the greatest stimulating power since World War Two.

Rosengren does admit however, that lowering the target interest rate has done some good in easing the market’s credit woes.

“Credit conditions, while difficult, would likely be much worse if the Federal Reserve had not lowered the federal funds rate and opened the additional liquidity facilities.”

The Federal Open Market Committee will meet again September 16 to decide if any further changes to the federal funds interest rate are warranted.