Oct. 29 Update: Fed Rate Cut Expected

The Federal Reserve's expected interest rate cut pushed the U.S. stock market on Tuesday, with the Dow Jones Industrial Average surging 889 points. Wednesday's Asian and European markets traded higher on anticipation of the news, while U.S. futures trading pointed to a hesitant investor base anxiously awaiting the news that is to be announced on Wednesday afternoon.

The Federal Reserve is expected to slash the prime lending rate by a half-point, taking the federal funds rate to 1 percent, as the Fed is pulling all stops to improve the worst financial crisis in more than 70 years. Economists predict the Fed will send a very strong signal that it will do whatever is needed to restore stability to the economy. Analysts also see the U.S. rate cut may be tried by other central banks around the globe to inject confidence into a badly-shaken financial system. This just three weeks after central banks dropped interest rates in concert to boost the global economy.

The new cut would take the interest banks charge each other down to a level last seen in June 2004. The last time the interest rate was that low was when Eisenhower was President, more than 45 years before.

Confidence Hits New Low

Businesses continuing to shed jobs, and on Tuesday a key measure of consumer confidence fell to its lowest level. The Conference Board's Consumer Confidence Index dropped to 38 from a 61.4 in September. This decline brings the index to its lowest level since it began in 1967.

Help for GMAC

The troubled financial subsidiary of General Motors, GMAC Financial Services, will get federal help to access the locked-down commercial credit markets, and has applied to become a bank holding company -- an action that would allow it to get a piece of the $700 billion financial bailout.

GMAC had already tightened its lending to consumers with a credit score of 700 or above this month, as its parent GM talks of a merger with Chrysler. It also says it will tighten lending standards in Europe, making it more difficult for financially-strapped consumers to get loans to buy vehicles.


About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.




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