Fed Cuts Interest Rates by Half-Point
The move was announced a little more than an hour before Wall Street opened for the first time since Tuesday’s terrorist attacks. Shortly after the Fed's announcement, the European Central Bank lowered its benchmark refinancing rate to 3.75% from 4.25%, the third rate cut this year.
If a rate cut leads to more spending by businesses and consumers, it will force manufacturers to increase production. That, in turn, pushes up the demand for the services of trucking companies.
Also, financial analysts who follow the trucking industry note that any rate cut can immediately reduce monthly interest expenses for some trucking operations, if they carry large floating-rate debt on their equipment.
n a statement accompanying the rate cute action, the Fed also said it believed the U.S. economy continued to face a bigger risk from weakness ahead than from a possible surge in inflation.
It was the third time this year the Fed's policy-setting Open Market Committee has decided to cut interest rates between scheduled meetings. The FOMC next meets Oct. 2.
By Transport Topics
H4>Statement By the Federal Reserve on Interest RatesThe Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 basis points to 3 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate to 2-1/2 percent. The Federal Reserve will continue to supply unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored. As a consequence, the FOMC recognizes that the actual federal funds rate may be below its target on occasion in these unusual circumstances.
Even before the tragic events of last week, employment, production, and business spending remained weak, and last week's events have the potential to damp spending further. Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate. For the foreseeable future, the Committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness.
In taking the discount rate action, the Federal Reserve Board approved requests submitted by the Boards of Directors of the Federal Reserve Banks of Richmond, Chicago, Minneapolis, Dallas, and San Francisco.
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