Federal Reserve cuts interest rate by 50 basis points to 1%

October 29, 2008 by · Leave a Comment
Filed under: Policy News 

No surprise here, the market was expecting this amount of rate reduction or more and the Fed delivered.  The Fed has now spent much of its ammo in fighting this economic crisis.  The real question is whether they will reduce it below the 1% level and how long they will keep it at this level.  It is good to add that Alan Greenspan (Former Fed Chairman) left our interest rate at 1% for 41 months after the 9/11 attacks and bursting of the tech bubble.  This fueled the two major bubbles we are dealing with now (House & Credit).

Release:

The U.S. Federal Reserve cut interest rates by half a percentage points on Wednesday, joining a new round of global cuts kicked off by China as policy-makers try to soften the world’s economic downturn.

The move was in line with most analysts’ forecasts and left U.S. stocks lower immediately after the move.

 

The Fed said the pace of U.S. economic activity appeared to have slowed markedly and it expected inflation to moderate as a result of lower energy and commodities prices.

 

Norway also cut rates on Wednesday, Japan may cut on Friday and the European Central Bank and Britain are expected to add to the monetary easing next week as authorities remain fearful that the worst financial crisis in 80 years will cause a long global recession.

Source: Reuters

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