Fed Cuts Discount Rate
08/17/07 - 09:22 AM EDT
Chris Nichols
The FOMC is the Fed's policymaking arm. It said it is "monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets."
For months, officials have been indicating the fed funds target probably wouldn't be cut as long as they felt economic numbers suggested the greatest threat was inflation, but many market participants have been hoping that stance would change amid the credit scare. Additionally, the Fed announced a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, instead of overnight. The changes will remain in place until the Fed determines that market liquidity "has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding." The Fed said it will continue to accept a range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. Following the move, stock futures recovered from early losses and were much higher.
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