The worst financial crisis in 70 years has forced the US Federal Reserve to employ all the weapons in its arsenal — including cutting interest rates to near historic lows — to try to keep the country from plunging into a deep recession.
Fed policymakers were expected to slash a key interest rate by a half-point, pushing the federal funds rate down to 1 percent, as they were to wrap up a two-day meeting yesterday.
That would put the Fed’s target for the interest banks charge each other on overnight lows down at level last seen during a 12-month period from June 2003 to June 2004. Before that period, the funds rate had not been that low in 45 years, since Dwight Eisenhower was president.
Economists believe the Fed is prepared to cut rates that low because of the rising fears that the financial turmoil of the past two months is raising the specter of a deep and prolonged recession.
“The Fed is going to send a very strong signal that they will do whatever it takes to restore stability to the economy,” said Mark Zandi, chief economist at Moody’s Economy.com.
The prospect of another sizable rate cut, coming just three weeks after a half-point move that was coordinated with a number of countries, sent the stock market soaring on Tuesday, pushing the Dow Jones industrial average up by 889.35 points, its second-biggest point gain in history.
A half-point rate cut yesterday would push borrowing costs lower for millions of consumer and business loans with banks moving quickly to match the Fed’s action by lowering their benchmark prime lending rate from 4.5 percent, where it has been for the past three weeks, down to 4 percent.
Many analysts believe a rate cut in the US will be followed by cuts in other major economies as central banks around the world try to inject confidence into a badly shaken financial system.
Analysts are split, however, on whether a Fed rate move this week will be followed by another rate cut at the central bank’s last meeting of the year on Dec. 16.
Some analysts think the Fed could drive the funds rate as low as 0.5 percent and might even go to zero, which the Bank of Japan did in an effort to combat a decade-long bout of malaise in the 1990s caused by a real estate bust in that country.
Other analysts believe the Fed will be content to lower the funds rate to 1 percent and leave it there, partly because pushing it any lower would remove any cushion should the economy fail to respond.
These analysts believe the Fed will depend on its other efforts to battle the credit crisis, which involve supplying massive resources to the banking system.
The Central Weather Administration (CWA) yesterday said it expected to issue a sea warning for Typhoon Fung-Wong tomorrow, which it said would possibly make landfall near central Taiwan. As of 2am yesterday, Fung-Wong was about 1,760km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point, moving west-northwest at 26kph. It is forecast to reach Luzon in the northern Philippines by tomorrow, the CWA said. After entering the South China Sea, Typhoon Fung-Wong is likely to turn northward toward Taiwan, CWA forecaster Chang Chun-yao (張峻堯) said, adding that it would likely make landfall near central Taiwan. The CWA expects to issue a land
The Central Weather Administration (CWA) yesterday said it is expected to issue a sea warning for Typhoon Fung-wong this afternoon and a land warning tomorrow. As of 1pm, the storm was about 1,070km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point, and was moving west-northwest at 28 to 32kph, according to CWA data. The storm had a radius of 250km, with maximum sustained winds of 173kph and gusts reaching 209kph, the CWA added. The storm is forecast to pass near Luzon in the Philippines before entering the South China Sea and potentially turning northward toward Taiwan, the CWA said. CWA forecaster Chang Chun-yao (張峻堯) said
PREPARATION: Ferry lines and flights were canceled ahead of only the second storm to hit the nation in November, while many areas canceled classes and work Authorities yesterday evacuated more than 3,000 people ahead of approaching Tropical Storm Fung-wong, which is expected to make landfall between Kaohsiung and Pingtung County this evening. Fung-wong was yesterday morning downgraded from a typhoon to a tropical storm as it approached the nation’s southwest coast, the Central Weather Administration (CWA) said, as it issued a land alert for the storm. The alert applies to residents in Tainan, Kaohsiung, Pingtung and Taitung counties, and the Hengchun Peninsula (恆春). As of press time last night, Taichung, Tainan, Kaohsiung, and Yilan, Miaoli, Changhua, Yunlin, Pingtung and Penghu counties, as well as Chiayi city and county had
The Central Weather Administration (CWA) yesterday issued a sea alert for Typhoon Fung-wong (鳳凰) as it threatened vessels operating in waters off the Pratas Islands (Dongsha Islands, 東沙群島), the Bashi Channel and south of the Taiwan Strait. A land alert is expected to be announced some time between late last night and early this morning, the CWA said. As of press time last night, Taoyuan, as well as Yilan, Hualien and Penghu counties had declared today a typhoon day, canceling work and classes. Except for a few select districts in Taipei and New Taipei City, all other areas and city
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