In a surprise move, the US Federal Reserve cut today the federal funds rate by three-quarters of a percentage point, in an attempt to fan the increased fears of a recession in the US economy.
The federal funds rate, the interest that banks charge each other on overnight loans, was slashed from 4.25% to to 3.5% on January 22, Tuesday, and was the biggest one-day move by the central bank in recent memory.
The decision was taken during an emergency telephone conference with Fed officials on Monday night. The move caught the financial markets by surprise because the Fed is slated to deliberate on the rate cut not this week but next week.
In a brief statement, the Fed said it decided to cut the federal funds rate “in view of a weakening of the economic outlook and increasing downside risks to growth.”
The move was made before markets had opened in the United States, hoping that the interest rate cut would limit the expected decline in U.S. stocks.
At the opening bell, the Dow Jones lost 300 points and fell even further by 465 points, but managed to rebound to close at 11,971.19, 1% higher from last week’s trading.
Will the Philippine stock market reverse its current trend of decline to follow the American stock market’s performance? We find out in a few hours.
