Stocks Soar on Rate Cut
A jubilant Wall Street barreled higher Wednesday after the Federal Reserve cut its benchmark interest rate by a larger-than-expected half a percentage point. The Dow Jones industrial average surged more than 320 points after the Fed announced its move.
Although some investors hoped for a rate cut of that magnitude, most were betting on a smaller, quarter-point cut in the federal funds rate. The Fed responded to the spreading impact of credit market problems on the rest of the economy by saying, "the tightening of credit conditions has the potential to intensify the housing (market) correction and to restrain economic growth more generally."
The Fed cut the benchmark fed funds rate to 4.75 percent after keeping it unchanged for more than a year. It has not lowered this rate since 2003. It also reduced the discount rate -- what it charges banks borrowing from its discount window -- by half a percentage point to 5.25 percent. On Aug. 17, the central bank lowered the discount rate by a half-point to help keep cash moving in the U.S. banking system.
Although some investors hoped for a rate cut of that magnitude, most were betting on a smaller, quarter-point cut in the federal funds rate. The Fed responded to the spreading impact of credit market problems on the rest of the economy by saying, "the tightening of credit conditions has the potential to intensify the housing (market) correction and to restrain economic growth more generally."
The Fed cut the benchmark fed funds rate to 4.75 percent after keeping it unchanged for more than a year. It has not lowered this rate since 2003. It also reduced the discount rate -- what it charges banks borrowing from its discount window -- by half a percentage point to 5.25 percent. On Aug. 17, the central bank lowered the discount rate by a half-point to help keep cash moving in the U.S. banking system.
Labels: Federal Reserve, rate cut
posted by Stock Administrator @ 3:48 PM
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