Stocks Soar After Fed's Bigger-Than-Expected Half-Point Cut in Interest Rates
NEW YORK (AP) -- 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 330
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. The central bank's decision and the wording of
its accompanying economic assessment gratified a market that plunged during
August amid fears that credit market tightness, spawned by a continuum of
mortgage defaults and delinquencies, would send the economy toward recession.
---------------------------------
Moody friends. Drama queens. Your life? Nope! - their life, your story.
Play Sims Stories at Yahoo! Games.
