In a bold move, the Fed cut interest rates by a half point to 4.75 down from 5.25 on Tuesday. Fear of recession, signs of a housing slump, and urgings from a concerned Wall Street influenced Ben Bernanke to respond by lowering the Federal interest rates. As a result, Wall Street surged up 300 points and the housing market is expected to stabilize.
In addition, the Fed may continue to drop rates for the next 3 to 9 months with another possible cut coming in October and then December.
“The Fed has rolled out the heavy artillery here. Bernanke is not being timid,” said Brian Bethune, economist at Global Insight. “The Fed has seen the problems. It is not trying to put out a forest fire with a bucket of water,” he said. (more)