The Fed cuts rates ahead of US market open, January 22, 2008 · The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of an American recession, cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory.

The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.

The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.

The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession.

In a brief statement, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."

Dow Jones industrial futures had been down more than 500 points, or more than 5 percent, before the Fed move. They fluctuated violently an hour before the start of trading, but improved to a level where they were down 380, or 3.14 percent, to 11,726.

From Associated Press reports.

via NPR