In another bid to stem the global financial crisis, the Federal Reserve this morning, in conjunction with other major central banks, cut interest rates. The Fed lowered its target for the federal funds rate by 50 basis points to 1.5% and cut the discount rate by the same amount to 1.75%.
The other banks taking rate-cut action included the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss and Swedish central banks.
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months, Fed officials said in a statement. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.
The officials noted that while inflation has been high, the decline in energy costs and other commodity prices have lowered the risks to inflation.
The action by the central banks helped overseas stock markets bounce from sharply lower levels and pushed U.S. stock index futures into positive territory.
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets, Fed officials said in the statement. They noted that the Bank of Japan supported the actions.