Fed approves reduction in discount rate |
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Published
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Fri, 17 Aug 2007 13:43
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WASHINGTON (AP) - The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks.The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis.The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.However, it has been infusing billions of dollars in money into the banking system over the past week to keep that rate from rising above the target level.Many economists believe if the financial market crisis worsens the Fed will soon move to cut the federal funds rate as well.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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Reductions in deficits of western European banks mask underlying risks - S&P 