Rates cut by one-quarter percent
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Manufacturing News, Source : TheManufacturer.com
Published : 25 Jun 2003 21:19
Officials hope the first reduction in interest rates since November will jump start the economy
In a move that surprised no one, the Federal Reserve opted to cut interest rates by an expected quarter-point on Wednesday afternoon and said the economy still looks sluggish. The move left the Fed funds rate at 1 percent, the lowest rate in 45 years. One member dissented from the 11-1 vote, noting that a half-point cut would have been a better option.
The Dow registered a 98-point loss Wednesday after the decision, falling just over 1 percent. Data that showed strength in the housing market and weakness in durable goods orders took a back seat as the Fed said in a statement that the economy has yet to achieve sustainable growth.
The action marks the first reduction to the funds rate since November and the 13th since January 2001, when the Fed embarked on an aggressive rate-cutting campaign to rescue the economy from a developing recession and the aftermath of the 9-11 attacks.
Some economic figures have recently shown early yet unconvincing signs of a slow recovery in the aftermath of the US-led intervention in Iraq.
However, other data suggest the economy remains lethargic. The rebound in consumer confidence in the aftermath of the US-led war in Iraq appears to have stalled, and demand for unemployment insurance claims remains high, suggesting that the job market continues to contract.
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