Fed Cuts Rates by 50 Basis Points


The Federal Reserve on Wednesday cut interest rates by a further 50 basis points to 3 per cent, in an aggressive move to try to keep the US out of recession.

The 50 point reduction, hot on the heels of the unscheduled 75 basis point cut last week, takes the total reduction over the past eight days to 125 basis points.

This is the most radical adjustment of Fed rate policy in a short period of time since 1982.

It reflects concern that a negative feedback loop between the financial system and the economy could be spreading from housing to other sectors.

Ben Bernanke is determined to catch up with and get ahead of the deterioration in the US economy, and provide some additional insurance against a disastrous growth outcome.

Policymakers were likely influenced in part by recent housing data, which suggest the housing downturn is intensifying.


Financial Times
1/30/2008 11:22:00 AM