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Fed Cuts Target Rate By Half Point

By: PAUL JACKSON
January 30, 2008

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As largely expected, the Fed cut the Federal Funds target rate 50 bps on Wednesday — just days after a 75 bp emergency cut. The cut comes as the U.S. grapples with the specter of a looming recession, the first to be led by a historic slump in housing and mortgage banking.

The target rate now stands at 3 percent, the lowest since June 2005.

“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the Fed said in a prepared statement. “Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.”

The FOMC’s decision wasn’t unanimous, however, with Richard Fisher, president of the Federal Reserve Bank of Dallas, serving as the lone vote against an increase.

The Fed also unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent.

Stocks rallied immediately after the news, with the Dow jumping up more than half of a percent in the minutes following the rate cut.

Click here to read the full statement by the FOMC.


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