Fed Cuts Rates to Head Off Market Meltdown

World stock markets took a beating yesterday on fears of a U.S. recession (who says were not as influential in the world as we used to be). The U.S. market was saved from a similar fate by the holiday, but many are expecting a big problem today. The Fed, fearing a big sell-off on Wall Street, preemptively cut the Fed Funds rate to try and calm the brokers:

WASHINGTON (AP) -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory.

The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.

The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.

The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession.

In a brief statement, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."

Three quarters of a point in one move is a big drop. It reveals some real fears on the part of the Fed and the U.S. government over the current state of the economy. Whether it will calm Wall Street is yet to be seen.

Scott Ott suggests a way in which Wall Street could restore confidence:

Stock Exchanges to Offer Top Shows, Comps

Hey, it works in Vegas.