The US Federal Reserve’s Open Market Committee (FOMC) slashed the target for the federal funds rate by 75 basis points overnight to 3.5 per cent.
This represents the biggest cut to the lending rate in more than 20 years.
The cut was in response to a weakening of the economic outlook and increasing downside risks to growth, according to a statement released by the FOMC.
”While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households,” the FOMC said.
“Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labour markets.”
According to the FOMC, inflation is expected to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.
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