USA: Federal Reserve slashes U.S. interest rates by half-percentage point in bid to shield economy from housing slump, Wall Street rallies

U.S. stocks jumped the most in four years on Tuesday (September 18) after the Federal Reserve slashed interest rates and raised hopes the economy could ride out a prolonged housing slump and turmoil in the credit market. The cut in the Fed's benchmark short-term rate, the first in four years, was more aggressive than many investors had expected: it now stands at 4.75 percent, its lowest level since May of last year. "Now that the Federal Reserve has done something that is strong, decisive, unexpected, and I think the assessment of the markets, both the bond market and the stock market, collectively will be that we are not headed towards a recession, that the economy is going to resume its recovery and the bull market will also be restored," said Johnson-Illington Advisors Strategist, Hugh Johnson. For the most part, people on Wall Street saw the rate cut as a positive step by the Fed, and were not worried about possible inflation. "Inflation is more of a secondary concern. I think the Fed was really forced to make this move and I think it was wise move. This will be a shot in the arm for the economy," said William Butler. Tuesday was the blue-chip Dow average's best one-day percentage gain since 2003.

ITN Source | September 19, 2007

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