Holding Our Breath, with a Learner in the Driver's Seat and a Desperate President Riding Shotgun

January 22, 2008

Fed Cuts Rate 0.75% and Stocks Swing

  By MICHAEL M. GRYNBAUM and JOHN HOLUSHA  

The Federal Reserve, responding to an international stock sell-off and fears about a possible United States recession, cut its benchmark interest rate by three-quarters of a percentage point on Tuesday, an aggressive move that came ahead of a regularly scheduled meeting of the central bank.

The Fed’s policy-making group, known as the Federal Open Market Committee, lowered its target for the federal funds rate, which regulates overnight loans between banks, to 3.5 percent, from 4.25 percent.

The surprise move, unusual in both its scale and its timing, underscored the severity of the current strains facing the economy. And it bolstered world markets that had opened the week with a sell-off. European stocks turned upward on the news, and Wall Street averted the deep losses that had been anticipated overnight.

“It’s a once-in-a-generation event,” said Mark Zandi, chief economist at Moody’s Economy…