The U.S. Federal Reserve System made an emergency 1/2 point rate cut Wednesday morning, which was coordinated with similar cuts made by central banks in other countries, chairman Ben Bernanke announced. It was the latest in a series of ‘epic emergency measures,’ as the New York Times dubbed them, designed to relieve the effects of the current economic crisis. First came passage of a $700 billion economic rescue package, which President George W. Bush signed on Friday. Next was the Fed’s decision on Tuesday to purchase short term commercial debt, a function normally carried out by private lenders who, in light of recent turmoil, have been unwilling to make such loans. All these moves are designed to free up credit and counteract the effects of bank failures brought on by toxic subprime mortgage debt. In early trading following the prime rate cut, investors didn’t appear totally reassured by the moves. The Federal Reserve Board will meet again Oct. 28 and is expected to consider further cuts in the discount rate.
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