Financial markets rejoiced this week after the U.S. Federal Reserve cut interest rates by a half percentage point to calm market turbulence and boost a shaky U.S. economy. The move is the first real test of new Fed Chairman Ben Bernanke, who took over from Mr. Alan Greenspan in February 2006.
The decision to cut the federal funds rate by 50 basis points to 4.75 percent, rather than just 25 basis points, suggests that the Fed is worried about the possibility of a real recession in the United States rather than financial market instability.
Meanwhile, the Bank of Japan has decided to keep its key interest rate at 0.5 percent, citing a possible downside risk in the U.S. economy and uncertainties in the global economy.
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