US Federal Reserve slashes rates

Last Modified: 22 Jan 2008
By: Sarah Smith

America cuts its rates to 3.5% but its markets continue to fall. Has the rate cut been interpreted as a sign of panic?

A big reduction in interest rates and the prospect of billions of dollars of tax cuts - but still the American markets are falling.

Stimulus

Share prices have continued to drop, despite the Federal Reserve's decision to cut rates to 3.5%.

The US Treasury Secretary Henry Paulson said the fundamentals of the US economy were strong, but there had been a slowdown in recent weeks that needed a stimulus.

Biggest cut since 1982

The emergency decision to announce an interest rate cut of three-quarters of a percent was the biggest reduction made by the Federal Reserve in one fell swoop for nearly a quarter of a century.

In London, it helped as the FTSE 100 - which had dropped another 230 this morning. But in America, shares are still tumbling.

Can the world escape America's gloom?

Although the Dow Jones and other stock markets are down, the Footsie in this country has bucked the trend, finishing nearly 3% up.

The global markets have been reacting to fears that the US is heading into recession. But are these fears justified? And would Britain necessarily follow America into the economic abyss?

Watch the report where our economics correspondent Faisal Islam considers if in today's globalised world, individual countries have the power to stave off the cold winds of recession.