According to media reports, a three-quarter point cut in the
Federal Reserve’s benchmark interest rate sent stocks skyrocketing on Tuesday.
In a stiff battle against the contagion of the credit crisis,
the Fed took its most agressive action in the last 25 years.
And Wall Street was back in business drawing in its biggest
gains in since 2003, reports the Associated Press.
The move was a reminder to market participants that the Fed will do whatever it takes to keep the country from slipping into a recession, say analysts.
The Dow finished Tuesday up 420 points at 12,392.66 (Yahoo Finance).
The rate cut moves the federal funds rate down to 2.25 percent – that’s a low point since 2004.
In response, commercial banks announced they would slash lending rates from 6 percent to 5.25 percent.
"We had been on the brink of the biggest financial meltdown this country had ever seen, but I think the Fed has now turned the psychology around," said David Jones, chief economist at DMJ Advisors in an AP report. "The Fed is saying it is ready to supply all the emergency credit banks need to get us out of this crisis."
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