You are in > manchester.com  > News > Fed Reserve cuts US interest rates by 0.75 per cent

Finance

Fed Reserve cuts US interest rates by 0.75 per cent

18/03/2008

The Federal Reserve has cut US interest rates by 0.75 per cent in a bid to restore confidence in financial markets and help the struggling economy.

Rates were lowered from 3 per cent to 2.25 per cent, a smaller cut than had originally been expected.

Expectations of the cut earlier today and helped support global markets recover from large losses yesterday.

The London financial markets bounced back on Tuesday after Sunday's news of the Bear Stearns sell-off led to a global slump in share prices.

The FTSE 100 closed the day 3.54 per cent stronger at 5,605.80, a rise of 191.4 points following a flurry of selling on Monday which left the index at its lowest point in two years.

The Dow Jones in New York rallied in earlier trading, opening up 2.42 per cent at 12,262.32, a rise of 290.7 points.

In the financial sector HSBC went up 7.24 per cent to 800p a share, Barclays rose 5.16 per cent to 412.75p, Lloyds TSB gained 4.71 per cent to 416.5p, and HSBOS finished up 4.20 per cent to 480.25p.

Yesterday, both Barclays and Royal Bank of Scotland had nine per cent wiped off their share price.

A total of £51 billion was wiped off the UK's top companies as confidence was hit by the near collapse of US investment bank Bear Stearns.

Rival JP Morgan Chase bought the crisis-hit bank for just £116 million on Sunday - less than one per cent of what it was worth a year ago.

Shares in financial companies around the globe plunged as investors feared other banking giants could in danger of folding from the subprime crisis.

Asia slumped overnight, with Hong Kong's Hang Seng down five per cent and Japan's Nikkei 225 index also falling 3.7 per cent.

The Dow Jones Industrials in New York then tumbled 194 points in early trading - a drop of more than 1.5 per cent - before recovering.