The Federal Reserve, confronted with a world-wide sell-off triggered by fears of a US recession, cut a key interest rate by three-quarters of a percentage point today. The benchmark overnight lending rate was cut to 3.5% from 4.25%, which drops the prime rate to 6.5%. The Fed acted after Asian and European markets plunged, and the Dow was expected to drop more than 500 points at the start of trading today.
The emergency rate cut was the Fed's first since 2001, and the biggest reduction in lending rates since October, 1984, when the rate was slashed by 1.75 percentage points. The Fed wasn't scheduled to meet until Jan. 29-30.