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Fed Cuts Interest Rate Amid Global Stock Sell-Off and Fears of Recession
By cpa | January 22, 2008
The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.
The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.
Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world’s largest economy was spreading worldwide.
Despite the Fed’s bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.
In a brief statement explaining its move, the Fed said that “appreciable downside risks to growth remain” and officials pledged to “act in a timely manner” to deal with the risks facing the economy. The action was approved on an 8-1 vote.
Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.
Topics: STOCK |