Fed Lowers Interest Rate to 4.5 pct

The Federal Reserve slashed its benchmark interest rate by a quarter point to 4.50%, as widely expected by most traders. Its statement hinted the Fed is reluctant to lower rates further. The FOMC statement said this second reduction in as many months should help the US economy withstand the fallout from August’s credit collapse.
“After this action, the upside risks to inflation roughly balance the downside risks to growth.”

The Fed acknowledged that “economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance”. At the same time, “the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction”.

This rate cut decision wasn’t unanimous among the voting members. Kansas City Fed President Thomas Hoenig preferred no change, which makes him the first dissenter since
December.

Upon the rate announcement, EUR/USD hit another record high around 1.4505, an expected resistance area, while USD/CHF fell to around 1.5550, an expected support area, before bouncing up.

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