Fed Minutes: Rate Cut in Sept. 'Prudent'

Source: Exec Digital USA

Date :10/10/2007 04:12:57

Worried that a jarring credit crunch would stifle the economy, Federal Reserve policymakers at their September meeting lower interest rates for the first time in four years.

Fed policymakers unanimously agreed to slash interest rates by one-half percentage point to 4.75 percent, calling it "the most prudent course of action," according to minutes of the Sept. 18 meeting released Tuesday.

The minutes underscored just how concerned Fed Chairman Ben Bernanke and his central bank colleagues were that the credit crisis and the worst housing slump in 16 years could undermine the country's economic health.

The minutes offered fresh insights into the September meeting, where Bernanke was faced with one of his most important decisions since taking office in February of last year.

On Wall Street, stocks rose sharply as investors viewed the minutes as indicating the Fed stands ready to lower rates again if needed. The Dow Jones industrials jumped 120.80 points to a new record close of 14,164.53.

Some Fed participants expressed concern that a weaker economy could worsen the credit crunch, which, in turn, could "reinforce the economic slowdown." At the same time, participants pointed out that in previous episodes of financial market disruptions, the economy showed some resilience when the country was suffering through a period of financial turbulence.

"Although financial markets were expected to stabilize over time, participants judged that credit markets were likely to restrain economic growth in the period ahead," the minutes said.

October 10 2007

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