Business | Markets
Channel Sponsor
Fed takes action to rescue markets
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 yesterday and indicated further rate cuts were likely.
- AP
- Published: 00:41 January 23, 2008
- Ben S. Bernanke, chairman of the US Federal Reserve, took surprise action by reducing the federal funds rate from 4.25 to 3.5 per cent, the biggest cut on record since 1990.
- Image Credit:
Washington: 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 yesterday and indicated further rate cuts were likely.
The surprise reduction in the federal funds rate from 4.25 down to 3.5 per cent 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 300 points in the first hour of trading and the dollar tumbled against the euro.
In New York morning trade, the euro was up 1.2 per cent on the day at $1.4622 after briefly racing to $1.4634. The euro has rebounded from a one-month low against the dollar of around $1.4366, according to Reuters data.
Against the Swiss franc, the dollar was down 1 percent to 1.0973 francs. The dollar was thumped against the high-yielding Australian and New Zealand dollars.
The dollar, however, fared better against the yen, with analysts citing repatriation flows on the back of collapsing equity prices. It traded up 0.5 percent at 106.54 yen.
The dollar touched its lowest in more than two and a half years against the yen.
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.
Share this article
More from Markets
More from Business
Popular in Business
-
Budget travel
Airlines in the region
Take a pictorial look at some of the budget airlines in GCC
Business Editor's choice
-
Cafe Nero's premium coffee blends
UK chain plans to open 50 outlets in region following UAE launch
-
Emirates to fly direct to Tokyo
Airline considers code-share deal with JAL after adding second destination in Japan
-
Work on world's longest sea crossing
The proposed Qatar-Bahrain causeway project is estimated to cost Dh9.9 billion
