WASHINGTON, October 30, 2008 (AFP) – The US Federal Reserve sliced its key interest rate another 0.5 percentage points to 1.0 percent Wednesday as signs emerged of thawing credit markets around the world. The Fed’s expected action came after China also chopped its benchmark one-year deposit rate by 27 basis points to 3.60 in a bid to spur economic growth, and expectations rose for rate cuts in Japan and Europe.
“Downside risks to growth remain” for the world’s biggest economy, said the Fed’s rate-setting committee in announcing the cut.
Stock markets in Asia and Europe soared on the prospect of easier money conditions, but benchmark US indexes which rocketed more than 10 percent Tuesday eased — the Dow Industrials off 0.85 percent and the S&P 500 down 1.11 percent — as traders had mostly already priced in the Fed’s rate cut, and as the Fed’s statement lacked positive news.
Ian Shepherdson, chief US economist at High Frequency Economics, said the Fed produced “a very downbeat statement, with all mention of upside inflation risks expunged from the record.”
Signs of global financial stress were still everywhere.
The International Monetary Fund created a new short-term liquidity fac