Fed cuts rates (edit w/ FOMC announcement):
Federal Reserve cuts rates in a
surprise move
January 3, 2001: 1:24 p.m. ET
NEW YORK (CNNfn) - In a surprise move, the Federal Reserve cut short term
interest rates Wednesday in a bid to steady the slowing economy and prevent
it from falling into recession.
In a statement, the Fed said it cut the federal funds rate by a half-point and the
discount rate by a quarter point. The Fed cited weakening sales, production
and lower consumer confidence for the cuts. Stocks surged on the news with
the Dow gaining more than 300 points and the Nasdaq composite rising almost
200 points.
The Fed also said it is leaning toward an additional quarter-point cut in rates if
the economy continues to slow.
The move brings the target for the federal funds rate to 6 percent and the
discount rate to 5-3/4 percent, the level requested by seven Reserve Banks
-
Release Date: January 3, 2001
For immediate release
The Federal Open Market Committee decided today to lower its target for the federal funds rate
by 50 basis points to 6 percent.
In a related action, the Board of Governors approved a 25-basis-point decrease in the discount
rate to 5-3/4 percent, the level requested by seven Reserve Banks. The Board also indicated that
it stands ready to approve a further reduction of 25 basis points in the discount rate to 5-1/2
percent on the requests of Federal Reserve Banks.
These actions were taken in light of further weakening of sales and production, and in the context
of lower consumer confidence, tight conditions in some segments of financial markets, and high
energy prices sapping household and business purchasing power. Moreover, inflation pressures
remain contained. Nonetheless, to date there is little evidence to suggest that longer-term advances
in technology and associated gains in productivity are abating.
The Committee continues to believe that, against the background of its long-run goals of price
stability and sustainable economic growth and of the information currently available, the risks are
weighted mainly toward conditions that may generate economic weakness in the foreseeable
future.
In taking the discount rate action, the Federal Reserve Board approved requests submitted by the
Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, St. Louis,
Kansas City, Dallas and San Francisc |
