Israeli investors, many of whom have recently taken a beating in both the local and overseas stock markets, are eagerly watching developments in the United States as the Federal Reserve on Wednesday said it had cut a key short-term interest rate by a half percentage point. The Fed also said it was prepared to cut rates further if needed to prevent the economy from slowing down too much. Already the Nasdaq has jumped by 11% and the Dow Jones by 3.4% in response to the news. The move, which came four weeks ahead of the year's first scheduled meeting of the rate-setting Federal Open Market Committee, takes the Fed funds overnight bank lending rate to 6 percent.

To underline its surprise move, the Fed also said it had cut the more symbolic discount rate on Fed loans to commercial banks by a quarter percentage point to 5.75 percent.

It was the first time the Fed cut interest rates between regular FOMC meetings since the fall of 1998, when a global economic crisis threatened to seize up world financial markets.

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