The U.S. Federal Reserve cut the rate at which it makes direct loans to banks, sending a signal to Wall Street that it is aware of the credit contraction that has hit global financial markets.(The Week)(Brief article)

The U.S. Federal Reserve cut the rate at which it makes direct loans to banks, sending a signal to Wall Street that it is aware of the credit contraction that has hit global financial markets. At the same time, the Fed wisely refrained from lowering its target federal-funds rate, through which it controls monetary policy. Demagogic politicians (and frantic investors) have shown less self-control, and the inevitable pressure to "do something" is bound to intensify. The Fed should resist this pressure. For one thing, the current crisis is unlikely to affect the economy in any significant way. As that becomes clearer, the hysteria will subside. For another, it is necessary ...