Fed cuts key rate below market expectations

Miercuri, 19 martie 2008, 2:46 English | Business

The Federal Reserve announced on Tuesday a 75bp cut to its key interest rate from 3% to 2.25%, smaller than expected by many financial experts, Reuters reports. The attempt to fight recession fears was taken with an 8-2 vote in the Fed's policy committee and prompted a slight slowdown of the Dow Jones before the index rose considerably to 12.392 (+420,41).

The announcement comes despite market expectations of a 100bp cut and follows considerable rebounds on financial markets in Asia and Europe on Tuesday, following the Monday falls.

The Fed warned that the risks to economic growth would not be fully removed by the cut and said pressure remained on financial markets.

Romanian stock analyst Liviu Moldovan told HotNews.ro on Tuesday that he saw two potential results - an optimistic one and a pessimistic one. The first would be that markets would come to normal as trust would return to capital and monetary markets. The second would be that the current joy on stock markets following the Fed announcement would last for only up to three days as the risk of the ongoing crisis to expand is still real.

He said that a healthy growth on the Romanian stock exchange would be seen only after foreign investors return to the market.