Federal Reserve cuts interest rates

SMART MOVE: Experts have applauded the move saying that it is a step in the right direction.

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Keywords: Central Bank, Funds

New York: US Stock markets ended on a high note after the Federal Reserve cut interest rates on Tuesday.

The Federal Reserve cut its benchmark fed funds rate by a full 50 bsp bringing it down to 4.75 per cent.

The Central Bank responded to the fall of from the down turn in domestic housing and the global credit turmoil.

US stock surged on the news the Dow rally 335 point or 2.5 per cent its biggest percentage gain in four years.

The NASDAQ jumped 70 points or 2.7 per cent. The snp 500 was the best gainer rising just under three per cent.

In its statement the Fed said it is cutting rates to help fore stall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets.

In other words the Fed is trying to prevent recession in the US and restore calm to global credit markets.

Experts applauded the move saying that it is a step in the right direction.

This is first time in four years since the Fed has cut all its important Fed Funds rate and the first time in a year that it has moved on rates at all.

In addition the Fed also lowered its discounts rate at 50 basis points that is the rate at which banks borrow directly from the Fed.

The rate cut was a dramatic move that should help restore investor confidence but some warn that it will not magically fix all of the economy problems.

(With CNN-IBN inputs)