August 17, 2007
Fed Aims To Ease Credit Crunch
In a surprise announcement, the Federal Reserve said today it was trimming the discount rate half a point to 5.75 percent, in an effort to rein in the recent credit crunch that has sent world markets reeling.
The move sent stocks rallying both on Wall Street and in Europe, where the volatile conditions have prompted officials to call for an international probe of credit-rating agencies and their impact on the global market.
The Wall Street Journal reports that "the Fed's decision to lower the discount rate and ease the terms of discount borrowing but not to cut the fed-funds target of 5.25% suggests that for now it believes the problems in the markets are mostly related to the availability of cash, not the price of cash." So far, economists are giving the Fed's decision mixed reviews.
The Journal has a copy of the Fed's announcement and a primer on the "discount window." Bloomberg News, Financial Times and New York Times are all following this story.
