Fed Rate cut by 75 bps to 2.25 per cent

Fed cuts rates by 75 bps to 2.25% points to restore confidence in the nervous financial markets and boost the ailing economy. US Treasury Secretary Henry Paulson had admitted earlier on Tuesday that the US economy is facing a “sharp decline”.

The Fed rate cut is the sixth time the central bank has lowered rates since September 2007 in a bid to boost the economy, which is reeling from the credit crisis triggered by a slump in the US housing market.

Here is how experts have viewed the latest Fed rate cut:

” The US is in a recession and when the largest economy in the world is in a recession, it is going to affect anybody who does business with them. But the companies who do not do business with America, they do not even know that the US is in recession. Some people are going to suffer and some are not going to.”

The big news is the return of inflation concerns to the statement, “inflation has been elevated, and some indicators of inflation expectations have risen”. When the credit crunch first hit, the Fed first tried balancing between inflation and weak growth. In January, the Fed abandoned modern inflation concerns, now it is back in again. Although, Bond Guru, Bill Gross thinks that the Fed should not be worried about inflation.