The announcement came an hour before US equity markets were to reopen for following Tuesday’s attack on New York’s financial district and the Pentagon.
The surprise cut, which occurred ahead of the Fed’s regularly scheduled interest rate meeting, set for October 12, is the eighth cut this year.
In the same announcement, the Fed stated that it “will continue to supply unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored. As a consequence, the FOMC recognizes that the actual federal funds rate may be below its target on occasion in these unusual circumstances.”
In an immediate reaction to the rate cut, commercial banks started cutting their prime rates.