Monday, August 20, 2007

The Fed Uses a Less Used Weapon in its Arsenol

Friday, the Federal Reserve cut the discount rate and the stock market soared. The Dow was up 233 points. Today (Monday) it appears that Asian stock markets are following suit. The market in Sydney is up 2.33%. Tokyo closed 3% higher and Hong Kong almost 6%.

The Fed reduce the rate it charges its member banks to borrow from it. Its more usual tool is open market operations: buying and selling government securities.

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