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FED CUTS RATES BY 1/2 POINT! !!!!!!!! o.T.
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Stocks Rally as Fed Unexpectedly Slashes Rates
By Justin Lahart
Associate Editor
1/3/01 1:20 PM ET
In a surprise move, the Federal Open Market Committee Wednesday cut the federal funds target rate by 50 basis points, to 6%.
Speculation that the Fed would make such a move had risen over the past week, particularly after a poor Purchasing Manager's Index yesterday showed that the economy may be slowing even quicker than believed.
Typically, the Fed moves on rates only at its regularly scheduled meetings. This is the first intermeeting move since the fall of 1998, when it cut rates in response to market fallout from the Russian debt crisis.
Stocks rallied sharply on the news, with the Dow up more than 300 and the Nasdaq up 110.
In its press release announcing the rate cut, the FOMC said, "These actions were taken in light of further weakening of sales and production, and in the context of lower consumer confidence, tight conditions in some segments of financial markets, and high energy prices sapping household and business purchasing power.
"Moreover, inflation pressures remain contained," the FOMC continued. "Nonetheless, to date there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating."
The Fed also cut the discount rate -- the rate it charges member banks for loans -- by 25 basis points, to 5.75%
By Justin Lahart
Associate Editor
1/3/01 1:20 PM ET
In a surprise move, the Federal Open Market Committee Wednesday cut the federal funds target rate by 50 basis points, to 6%.
Speculation that the Fed would make such a move had risen over the past week, particularly after a poor Purchasing Manager's Index yesterday showed that the economy may be slowing even quicker than believed.
Typically, the Fed moves on rates only at its regularly scheduled meetings. This is the first intermeeting move since the fall of 1998, when it cut rates in response to market fallout from the Russian debt crisis.
Stocks rallied sharply on the news, with the Dow up more than 300 and the Nasdaq up 110.
In its press release announcing the rate cut, the FOMC said, "These actions were taken in light of further weakening of sales and production, and in the context of lower consumer confidence, tight conditions in some segments of financial markets, and high energy prices sapping household and business purchasing power.
"Moreover, inflation pressures remain contained," the FOMC continued. "Nonetheless, to date there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating."
The Fed also cut the discount rate -- the rate it charges member banks for loans -- by 25 basis points, to 5.75%
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