Fed running scared of recession

29 January 2008

The Federal Reserve has made a move to combat the effects of the credit crunch by auctioning off $30 billion of investment to commercial banks with a reduced interest rate.

At an interest rate of 3.123 per cent this is the fourth time the Fed has tried to help US banks by providing an affordable financial cushion.

In order to keep banks in business, the US central bank is looking to lending its nation's finance houses a massive discounted amount in order to avoid a recession.

While some may be sceptical of the strategy, the latest auction results indicated that the lower interest rates have shown success.

The Federal Reserve seems to think that an aggressive initiative is the only way to help the US in the face of the severe credit crunch.

Officials from the central bank will meet again this week to discuss other measures to stave off the recession.

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