Tuesday

US Federal Reserve Cuts Rates By 0.75%

The U.S. Federal Reserve Board cut interest rates by three-quarters of a percentage point Tuesday and left the door open to more cuts in the near future in efforts to ward off a recession or worse, But it was less than the full percentage point investors had come to expect. With today's move, the central bank has now lowered interest rates by a full three percentage points since September, bringing it to the lowest point since late 2004. It marked the second back-to-back cuts of three-fourths of a percentage point. The Fed's policy-making Federal Open Market Committee voted 8-2 to cut its short-term interest rate target to 2.25% from 3%, bringing cumulative declines in less than two months to two percentage points, the most rapid pace of easing in years. The Fed also on Tuesday lowered the discount rate it charges banks and brokers that borrow directly from the Fed by 0.75 percentage point to 2.5%, leaving the spread over fed funds at a quarter point. In the statement accompanying the decision, the Fed said that the outlook for economic activity has weakened further, consumer spending has slowed and labour markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

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