The Federal Reserve made history today with its anticipated rate cut, a slashing that could have an impact on a number of exchange traded funds (ETFs), not to mention the broader economy.
The rate cut, to a range of 0% to 0.25%, is the lowest on record. The central bank also said it would use “all available tools” to combat the financial crisis, reports the Associated Press. But these other tools will be relatively new and untested, points out Edmund L. Andrews for the New York Times.
The zero-interest rate policy was employed by Japan for six years in its own fight against deflation. The federal funds rate for which interest rates were slashed affects the rate at which banks lend their reserves to one another.
Other tools the Fed could be considering include printing money in vast quantities, a process which has already begun. Since September, the Fed’s balance sheet has expanded from about $900 billion to more than $2 trillion as it lends money to new programs.
In the minutes following the announcement, the Dow Jones Industrial Average began a climb that has it up about 235 points as of 2:38 ET.
The PowerShares DB U.S. Dollar Index Bearish (UDN) is down 4.8% year-to-date. It’s been fluctuating all morning ahead of the announcement. Rate cuts typically weaken the dollar’s value
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