US Federal Reserve cuts rates by 25 bps

US Federal Reserve has cut both Fed funds rate and discount rate by a quarter-point to 2% and 2.25% respectively. This is the seventh rate cut since September 2007.

After a two-day meeting, Fed announced its decision to cut rates down to 2%, its lowest level since late 2004.

The impact of the act on markets will be seen tomorrow as Bombay Stock Exchange was closed today on account of Maharashtra Day.

Ron Muhlenkamp of Muhlenkamp Fund, said, "The first signs were that long term interest rates had hit down and then we see signs of the Fed getting serious of bringing the rates down. That happened in January after the Societe Generale and then it was the Bear Stearns. We think that it has broken the momentum."

Martin Feldstein of the National Bureau of Economic Research, said, "I think that it is definitely enough. I think that the economy is weak but nevertheless, there is really no traction, no reason for further cuts by the Fed. Afterall, the long term mortgage rates have not come down while the Fed Funds rate have come down 300 bps, but I think the economy is really weak and not something that the Fed will be able to help at this point of time."