Bernanke "Kisses His Sister," Increasing Uncertainty about What Will Happen Next
December 11, 2007
Fed Cuts Rate a Quarter Point; Stocks Dive
The Federal Reserve cut a key short-term interest rate today by a quarter of a percentage point, to 4.25 percent, signaling its concern that the credit crisis might be gradually damaging the broader economy beyond housing.
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Investors reacted by sending stocks plunging and by bidding up Treasury bond prices. The Dow Industrials fell more than 200 points in a matter of minutes and kept sinking through the afternoon, closing off more than 294 points, or 2.1 percent, for the day, according to preliminary figures. Broader indexes like the Standard & Poor's 500 and the Nasdaq Composite fared even worse.
In an unusual statement after the meeting, the Fed’s policymakers declined to say whether they were more concerned about inflation or the outlook for economic growth. Their statement said that “Recent developments, including the deterioration of financial market conditions, have increased the uncertainty” abo…