The Fed's Move: More Than a Symbolic Gesture

S&P says the discount-rate cut has reduced the risk that the credit crunch could send the economy into a downward spiral

The Federal Reserve cut its discount rate -- the rate for borrowing from the Fed, and provides temporary liquidity support to banks -- by 0.50 percent on Aug. 17 to 5.75%. The move does not affect the federal funds rate, which remains at 5.25%. The move is intended to free up liquidity support for the commercial paper market, which has dried up because of the general credit squeeze, reports S&P MarketScope, providing what should be direct support for Countrywide (CFC) and other beleaguered firms.

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