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Fed Cuts The Discount Rate-Markets Set For Big Gains
The Fed cut the discount rate to 5.75% from 6.25%, noting market conditions have deteriorated since it last met Aug. 7. ``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward, '' the central bank's Federal Open Market Committee said in a statement. ``The downside risks have increased appreciably.'' The FOMC left the overnight rate unchanged at 5.25 percent. Markets might have a very positive reaction to this news today as the futures have jumped over 25 points from negative to positive territory on the news. A boost in equity markets will be suportive for carry trade positions and will cause the dollar to weaken vs the high tielders and gain vs the Yen as pairs such as GBP/JPY appreciate.
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