Fed Lowers Interest Rates In Bid to Reassure Markets --- More Decreases May Come, Depending on the Need; ECB Also Cuts Rates
WASHINGTON -- Moving to bolster confidence even before the stock market opened, the Federal Reserve cut its target for short-term interest rates by one-half percentage point and promised to continue to supply "unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored."</br></br>The Fed's move was followed by the European Central Bank as well as the Canadian and Swiss central banks, but not by the Bank of England. "Following the terrorist attacks on the U.S.," the ECB said, using blunter language than the Fed, "uncertainty about the U.S. and the world economy has increased."</br></br>The Fed left the door open to further rate cuts, emphasizing the weakness that had been seen in employment, production and business spending even before last Tuesday's terror, and the economic risks ahead.</br></br>The size and timing of the central bank's next move depends on the course taken by the economy and financial markets in the coming weeks.</br></br>"Any projections about what the economy and the Fed will do in coming months need to be taken as even more tentative than usual," economists at UBS Warburg said, even as they predicted a one-quarter-point interest-rate cut at the Fed's Oct. 2 meeting and another of the same size in November.