Fed makes emergency rate cut

The Federal Reserve today cut its key overnight interest rate by three-quarters of a percentage point in an effort to stave off fears over a potential U.S. economic recession.

The rate on overnight loans between banks now stands at 3.5 percent from 4.25 percent. The move not only came early -- between the Fed's regularly scheduled meetings on monetary policy -- but also represented the largest such cut since 1984.

From the Fed's statement:

"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth.  While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.  Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."

According to news reports, U.S. stocks initially opened with a plunge today, taking a cue from stock markets in Europe and Asia, which had plummeted for two days. (See "Say bye to that castle of sand?")

But the New York Times reports, after opening down by more than 460 points, the Dow Jones industrial was off about 150 points, or 1.2 percent, at 10:30 a.m.

Do Inman News readers think this move by the Fed will have a significant impact on housing and mortgage markets?

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