Today, the Federal Reserve System decreased the national benchmark interest rate by 0.75% â from 4.25% down to 3.50%. This was an emergent move to stimulate the financial liquidity amidst the tumbling stock markets.
It was the first such move since the aftermath of 9/11, when global markets reacted with a similarly sharp decline. But the current bearish market can be expected to be more lasting and powerful than the last one.
The next scheduled meeting of the FOMC should have been held on January 29/30. But the Committee had to meet today in Washington to act fast in order to stop the economy’s recession. Yesterday was the holiday in U.S. (Martin Luther King Day), so the action couldn’t be taken earlier:
While strains in
short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.
Dollar started to lose its positions rapidly against the euro after this rate cut was announced today. EUR/USD went up from 1.4365 to 1.4557, almost recovering from the yesterday’s huge loss.
If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.