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Fed Slashes Interest Rates.
WASHINGTON (Reuters) - The U.S. Federal Reserve on Tuesday slashed U.S. interest rates by a hefty three-quarters of a percentage point, the biggest rate cut in more than 23 years, in an emergency bid to lend support to a U.S. economy some fear is on the verge of recession.
The action by the rate-setting Federal Open Market Committee took the key federal funds rate, which governs overnight lending between banks, down to 3.5 percent, its lowest level since September 2005. The Fed also lowered the discount rate it charges on direct loans to banks to 4 percent.
The move comes amid a massive global stock sell-off brought on by deepening fears that a U.S. recession would drag the rest of the world economy down with it. U.S. stock markets, closed on Monday, appeared headed for a much lower open, although stock index futures pared some losses after the cut.
"It is obviously a surprise but it seems the markets could not wait for the promised rate cut at the end of the month and neither could the Fed given the behavior of the markets over the last few days," said Kevin Logan, economist at Dresdner Kleinwort Wasserstein in New York.
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