Wednesday, March 19, 2008

Fed cuts interest rates yet again

The Federal Reserve slashed a key interest rate by three-quarters of a point Tuesday, capping its most aggressive two months of action in a quarter-century in a battle to halt a spreading credit crisis. Wall Street loved it, bursting to its biggest gain in five years.

The strong Fed action seemed to convince investors, at least for now, that the central bank will do whatever it can to keep the country out of a steep recession. The Dow Jones industrial average finished the day up 420.41 points at 12,392.66.

The latest Fed move brought the federal funds rate — the interest that banks charge each other — down to 2.25 percent, the lowest since late 2004. That's important far beyond bank boardrooms. The reduction triggered announcements from commercial banks that they were cutting their prime lending rate to 5.25 percent from 6 percent. This rate is the benchmark for millions of business and consumer loans.

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