Fed cuts rates by 75 bps

The US Federal Reserve has cut funds and discount rates by 75 bps, reports CNBC-TV18. It has cut the discount rate by 75 bps to 4% while the funds rate is now at 3.5%.

This is the first inter-meeting rate cut since September 17, 2001. "We are still not forecasting a recession this year," the Fed said.

US Treasury Secretary Henry Paulson said the rate cut shows that the Fed is nimble and is able to move quickly. "We continue to remain confident about the global economy. The US economy is resilient," Paulson said.

Job creation continues at a lower pace, he said. "American workers are the most productive anywhere in the world."

The Federal Reserve has stepped in with an emergency rate cut. The Fed has cut both the funds and discount rates by 75 bps. This comes as an attempt to limit the risks of a recession, after huge selling in global financial markets. It is the largest rate cut in one shot for the first time in 24 years.

The Fed said it is cutting these rates because of increased downside risks to growth, deterioration of broader markets, tightening of credit for businesses and households and because of data showing deeper correction in the housing market. The Fed said it expects inflation to soften and that risks to growth will remain. Hence, the Fed will remain ready to act.