Industry News

Fed slashes short-term rates again

50-basis-point cut follows Jan. 22 emergency move

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In an indication that the Federal Reserve sees an increased risk of recession, a committee that sets monetary policy cut two key short-term interest rates today by half a percentage point. The Federal Open Market Committee's decision to slash its target for the federal funds overnight rate to 3 percent, and the discount rate to 3.5 percent, was not unexpected. But coming on the heels of an unscheduled 75-basis-point cut in both rates Jan. 22, the 1.25 percent reduction the Fed has undertaken in just eight days surpasses short-term interest-rate cuts made in all of 2007. "Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," members of the committee said in a statement. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets." After the breakdown of credit markets in August, the Fed cut 50 basis points off the federal funds and discount rat...