In a further move aimed at easing the credit crisis and propping up US banks, the Federal Reserve Board on Tuesday cut the federal funds rate, the key short-term interest rate, from 3 percent to 2.25 percent.
This is the Federal Reserve’s sixth rate cut since September of last year, slashing a full 3 percent from the target rate for short-term inter-bank loans. The Fed also cut the discount rate, the rate it charges banks for direct loans, from 3.25 percent to 2.5 percent.
Interest rate futures markets and many financial commentators had indicated they were expecting cuts of 1 percent in both the federal funds and discount rates. However, after a brief 150-point plunge following the Fed’s announcement, the stock market rallied sharply, with the Dow Jones Industrial Average closing at 12,391.52, up 419.27 points, or 3.5 per cent, for the day.
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.