Today, the US Federal Reserve slashed interest rates by 0.75% to 2.25% in a desperate attempt to prevent meltdown in the financial markets. The decision followed the weekend bailout of Bear Stearns, which was saved by rival JPMorgan Chase with the help of Fed cash. The shocking demise of Bear Stearns has prompted fears on Wall Street and in the City that the credit crunch could claim yet another high profile victim as lending between banks dries up. The Fed had previously cut rates by 1.25% to 3% this year alone and pumped billions of dollars into the markets. Although this has so far done little to restore confidence or calm. There are great concerns that the Fed and other central banks are powerless to solve the crisis. Pressure is now growing on the Bank of England and European Central Bank to cut rates, although both are concerned about rising inflation. Official figures released showed that inflation in Britain rose sharply in February from 2.1% to 2.5%, leaving the City split on the Bank of England’s next rate call.
Tags: Bank of England, central bank, Credit crisis, credit crunch european central bank, financial markets, money markets, Rate reduced, US Federal Reserve