Interest Rate Cuts Slow Stock Slide, Soothes Nervous Investors
EL PASO — In the face of a weakening economy, the Federal Reserve cut a key interest rate by 3/4 of percentage point, ahead of the January 29 meeting in which analysts predicted the cut.
Hoping to stave off a further decline in the markets ahead of the opening bell Tuesday morning, the Fed made the decision and said further adjustments may come by month’s end.
A two-day global sell-off promptedthe unexpected action and by the closing bell on New York’s stock exchange floor, the Dow had fallen over 450 points, then rebounded to end at a 128-point loss.
Fears of a slowing U.S. economy continued to push the stock snowball downward amid the growing concerns of recession and Reserve chairman Ben Bernanke was criticized for not having acted sooner.
“He’s been wrong so many times,” said Senator Jim Bunning, R.-KY.
Congressional leaders met with President Bush about his proposed plan to stimulate the economy possibly through rebate checks, tax cuts for businesses, and additional funding for food aid and employment assistance.
“The elements of the legislation must have immediate impact. If we miss this, we miss the mark,” said U.S. Treasury Secretary Henry Paulson.
Senate Majority Harry Reid said that in order to be effective, a plan needed to be implemented quickly. His window of ‘four weeks’ was a dramatic push, but Sen. John Cornyn, R.-TX felt it was an achievable one.
“I think we can do it. The question is, ‘What’s that stimulus package going to consist of?'” Cornyn said.
Drastic cuts like the one seen today have not happened for quite some time and that has many worried about 401k’s through employers. Market jitters and a ‘follow-the-trend’ attitude can create unnecessary panic and mass sell-offs, but many financial planners recommend calm during the storm.
