SB, buy on the bad news, sell on the good news.
>The US central bank has cut interest rates by half a percentage point to 2%, the lowest rate in 40 years.
Following the cut, the cost of borrowing in the US has fallen sharply below the annual rate of inflation, currently running at 2.6%.
Borrowing of money is therefore, in effect, subsidised.
This, the US authorities hope, should encourage consumers to spend more money and businesses to re-launch investment projects shelved as the economy began to turn down earlier this year.
This was the 10th time the Federal Reserve, under chairman Alan Greenspan, cut rates this year as part of its efforts to boost the flagging US economy.
The Fed's decision to cut was unanimous.
President George W Bush's government has also attempted to boost economic growth by increasing government spending and by pushing a multi-billion dollar tax relief and industry bail-out package through Congress.
Taken for granted
Ahead of the cut, a slew of downbeat economic data had led many observers to predict the Fed's decision.
Last week, official figures showed that the US economy shrank for the first time in eight years during the three months to September, contracting by 0.4% and shedding nearly half a million jobs.
Separate data showed that US consumer spending, which has been credited with keeping recession at bay, posted its sharpest monthly decline in 14 years after the 11 September terrorist attacks.
In a poll carried out by the Reuters news agency, 15 out of 24 analysts predicted a 0.50% cut, while the remainder forecast a 0.25% reduction. |
