Fed Cuts Rates by 75bps to a New Record Low

The U.S. Federal Reserve decided on Tuesday to lower its Fed Funds rate by 75 basis points to 0.25 percent, the lowest level for the overnight rate ever. Labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined, according to the Federal Open Market Committee (FOMC) statement released after the rate decision. In fact, the Fed is concerned about the ongoing slowdown in economy activity, tight credit conditions and the continuing housing contraction which is likely to weigh on economic growth over the next few quarters.

Market Reaction

The U.S. dollar, which had been lower ahead of today's Fe's rate decision, fell even further gainst the world's most heavily traded currencies, in the minutes following the rate decision. However, the currency market remains very volatile which makes it very difficult to make any type of cause-effect extrapolation between the price action and today's Fed rate decision.

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