Prospect of 50 basis point cut by the Federal Reserve

by Richard Kilner

Story link: Prospect of 50 basis point cut by the Federal Reserve

The chairman of the Federal Reserve, Ben Bernanke, has hinted that at its forthcoming meeting interest rates could well be cut by perhaps as many as 50 basis points.

Following the news a flurry of financial activity ensued which saw stocks achieve consecutive days of gains for the first time in 2008.

The Dow Jones rose by almost 1% to 12,853.09 and the Nasdaq increased in value by over half a percent to 2,488.52.

Bernanke’s hint suggests that the Federal Reserve may change its interest rate emphasis from inflation to the growth.

The move has been broadly welcomed, as much of the market has been calling for a rate cut to help boost flagging growth.

Last year saw rates cut by 100 basis points to 4.25%.

Recently the prices of both energy and food have increased rapidly which may play a part in the Federal Reserves considerations.