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August 17, 2007
Stocks Surge on Fed Action
The Federal Reserve has cut one of its prime discount rates in order to make it easier for banks to get direct loans:
The Federal Reserve approved a half-percentage point cut in its discount rate on loans to banks Friday, a dramatic move designed to stabilize financial markets roiled by a widening credit crisis. TThis proved to be good news for the stock market which soared more than 200 points within an hour of opening. European markets also rebounded on the news from the Fed. Wall Street had been asking for just such a move from the Fed for several days.
he decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks, will be lowered to 5.75 percent, down from 6.25 percent.
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year. Friday's move was not expected to have an immediate impact on consumer borrowing.
While this by no means ends the credit crunch, it may slow down the panic that has gripped the market at times over the last week.