Fed Cuts Window Discount Rates

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Fed Cuts Window Discount Rates

The Federal Reserve has announced that it is cutting the so-called window discount rate by 0.5% to 5.75% , in reaction to concerns about the subprime lending crisis and volatility in the financial markets.

The fed funds rate has not been cut.

The Fed said it took the move to "promote the restoration of orderly conditions in financial markets."

It also said that "financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward."

Adding "although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably".

It also indicated that it was ready to take more action if required.

The timing, before the markets opened, was also designed to catch shorters off-balance. DOW futures have risen sharply, the FTSE has gone from fdown 30 to up 189 - it was up over 230 at one point.

Art Cashin says : "it's very unusual to cut the FED discount rate - banks don't like using it as it dras attention to themselves but it is the right thing to do - it is still above fed funds rate - shows Fed may do more down the road - Yen is still critical "

People have reacted very favourably - Bernanke seen as being a maestro.

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