The Federal Reserve aggressively cut its benchmark rate today, dropping the federal funds rate a half-point to 4.75%. The larger-than-expected cut was “intended to help forestall” the ballooning credit crisis, the central bank said in a statement. The cut in the key interest rate, the first in 4 years, was double the quarter-point drop that had been widely expected, Bloomberg reports.
The federal funds rate had stood at 5.25% since June 2006. The cut matched a simultaneous 50-basis-point drop in the discount rate, which now stands at 5.25% after an unanticipated half-point cut on August 17. Stocks rose on the news within minutes of the announcement, Reuters reports, while the battered dollar fell further.