Archive for the ‘lending Rate’ Category

Stocks soar, Dow rises 420 points

March 18, 2008
By MADLEN READ, AP Business Writer 

NEW YORK – Wall Street stormed higher Tuesday as investors, optimistic following stronger-than-expected earnings from two big investment banks, were also galvanized by the Federal Reserve‘s decision to cut interest rates by three-quarters of a percentage point. The Dow Jones industrial average soared 420 points, its biggest one-day point gain in more than five years.

Trader Vincent Quinones, foreground right, gathers with other ...
Trader Vincent Quinones, foreground right, gathers with other traders on the floor of the New York Stock Exchange, Tuesday March 18, 2008. Wall Street gave up some of its steep gains Tuesday while investors digested the Federal Reserve’s decision to cut interest rates by three-quarters of a percentage point. Many investors had expected a cut of a full percentage point.(AP Photo/Richard Drew)

Many investors were expecting the Fed to cut rates a full point, but appeared to overcome their early disappointment, especially since a 0.75 point cut is still substantial. The central bank’s benchmark fed funds rate is now at 2.25 percent — its lowest level since December 2004, and less than half what it was last summer. The Fed began lowering rates exactly six months ago, after the credit markets seized up due to soaring defaults in subprime mortgages.

In its statement accompanying the rate decision, the Fed said “recent information indicates that the outlook for economic activity has weakened further,” but also that “uncertainty about the inflation outlook has increased.”

“The Fed once again in the statement showed that it is ready for further action if this were needed,” said Christian Menegatti, lead analyst for online economic research firm RGE Monitor. “It also showed the fact that it’s still paying attention to inflation … but that it is far from being the primary concern right now. And the market knows that, and it is happy.”

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Fed takes new steps to ease crisis

March 17, 2008
By JEANNINE AVERSA, AP Economics Writer 
Sunday night 2148 Eastern Time
 

WASHINGTON – The Federal Reserve, in an extraordinarly rare weekend move, took bold action Sunday evening to provide cash to financially squeezed Wall Street investment houses, a fresh effort to prevent a spreading credit crisis from sinking the U.S. economy.
US dollar and pound sterling banknotes. The pound has posted ... 

The central bank approved a cut in its lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created another lending facility for big investment banks to secure short-term loans. The new lending facility will be available to big Wall Street firms on Monday.

“These steps will provide financial institutions with greater assurance of access to funds,” Federal Reserve Chairman Ben Bernanke told reporters in a brief conference call Sunday evening.

The Fed acted just after JP Morgan Chase & Co. agreed to buy rival Bear Stearns Cos for $236.2 million in a deal that represents a stunning collapse for one of the world’s largest and most venerable investment banks. Just on Friday the Fed had raced to provide emergency financing to cash-strapped Bear Stearns through JP Morgan. Days earlier the Fed announced a set of other unconventional steps to thaw out a credit market in danger of freezing shut.

The new lending facility — described as a cousin to the Fed’s emergency lending “discount window” for banks — is geared to give investment houses a source of short-term cash on a regular basis — if they need it.

It will be in place for at least six months and “may be extended as conditions warrant,” the Fed said. The interest rate will be 3.25 percent and a range of collateral — including investment-grade mortgage backed securities — will be accepted to back the overnight loans.

Treasury Secretary Henry Paulson said he was pleased by Sunday’s developments.

“Last Friday, I said that market participants are addressing challenges and I am pleased with recent developments. I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets,” he said.
Queen Victoria (front) and Queen Elizabeth 2 (back) depart for ... 
Queen Victoria (front) and Queen Elizabeth 2 (back) depart for a Royal Rendezvous at Sydney Harbour in February 2008. The global cruise industry is putting on a brave face as it sails into seas darkened by a faltering US economy, a weak dollar and record oil prices, major cruise ship operators said at their annual convention.(AFP/File/Anoek de Groot)

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