Stocks surged in key markets after the Fed moved aggressively to head off the risk of a sharp slowdown in the US economy on Tuesday, cutting interest rates by 50bp to 4.75%, and cutting the discount rate at which it lends directly to banks by 50bp. The Fed said its move was intended to “help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets”. In its statement, the Fed did not suggest further rate cuts but simply said it would act “as needed” to pursue its two objectives: price stability and sustainable economic growth. However, the market interpreted Tuesday’s action as signalling the start of a rate-cutting cycle. Asian stocks on Wednesday followed US and European markets with strong gains, reports Bloomberg.

This entry was posted by Gwen Robinson on Wednesday, September 19th, 2007 at 5:52 and is filed under Capital markets. Tagged with federal reserve. Edit this entry.