Fed Shaves Half- Point Off Discount Rate

Surprise cut boosts futures trading and Euro markets
By M. Morris,  Newser Staff
Posted Aug 17, 2007 8:14 AM CDT
Federal Reserve Board Chairman Ben Bernanke testifies on Capitol Hill in Washington, Thursday, July 19, 2007, as he delivers his semi-annual monetary report to the Senate Banking Committee. (AP Photo/Dennis...   (Associated Press)
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(Newser) – In a surprise move, the Fed cut its discount rate, which it charges on direct loans to banks, from 6.25% to 5.75% this morning. The central bank acted to calm fears about uncertainty in the global markets surrounding the worsening credit crunch and underlying subprime-loan crisis. The federal funds rate, which banks charge each other, was unchanged at 5.25%.

US futures and the European exchanges climbed on the news, which came after the Fed's moving billions of dollars into the banking system didn't quell worries over liquidity. "Financial market conditions have deteriorated and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward," the Fed said in a statement.