WASHINGTON (AP) -- 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 on Tuesday and indicated further rate cuts
The surprise reduction in the federal funds rate from 4.25
down to 3.5 percent marked the biggest funds rate cut on records going back to
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.
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.
"The world's stock markets are in
meltdown so the Fed came in with an inter-meeting move to try to stop the
panic," Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.
Which only goes to show that the United States is the engine of the world's economy. People all over the world have jobs and homes because of us.
Now, truth is, we could go into a recession. It would not be enjoyable. However, in the long run, where would you put your money? The very fact that the world's markets cascade when ours are troubled underscores the fact that, in the long run, our is the best bet.
If investors saw other markets as viable options, then other markets would grow when ours went down.