Federal Reserve Slashes Funds Rate By .75 Percent

Fears of recession rise as the Federal Reserve had an emergency rate cut today lowering a key interest rate by three quarters of a percent.

The funds rate is the rate at which banks borrower money overnight at 3.5 percent after what is the biggest rate cut in over 23 years. The Fed also lowered the discount rate it charges on direct loans to banks to 4 percent.

The Fed’s bold bid failed to instill confidence in shaken financial markets as U.S. stocks, playing catch-up with sell-offs around the world, fell sharply at the open. John Tierney, an analyst at Deutsche Bank in New York stated that “The Fed is very, very, very worried.”

“The committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” the Fed said, referring to its policy-setting Federal Open Market Committee.“While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further

Even after the Fed’s move, interest-rate futures markets showed a 74 percent chance of another half-percentage point reduction in U.S. rates next week at the scheduled Fed Meting on the 30th. They also pointed to a federal funds rate of 2.25 percent by mid-year.

To read more about the Fed’s surprise rate cut draws mixed response head on over to CNBC.