US Fed cuts rate to zero to reinvigorate business

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From Fazle Rashid
NEW YORK, Dec 17: The US Federal Reserve in a dramatic move yesterday brought down the interest rate to zero and made its intention clear that it would pump in as much money as required in the market to reinvigorate a limbering business and provide a shot in the arms of the consumers via " an expanding array of new lending programme".
Of much greater practical importance , the Fed bluntly announced that it would print as much money as necessary to revive the frozen credit markets and fight what is shaping up as the nation's worst economic downturn since World War 11, the New York Times (NYT) reported today.
President-elect Obama, overtaken by the bad turn of events, gathered his economic team for a four-hour session in Chicago to map out plans for an enormous economic stimulus measure that could cost between $600 billion and $1.0 trillion over the next two years. We are running out of the traditional ammunition that is used in the recession which is to lower interest rate, president-elect Obama was quoted by the NYT as saying.
Fed said it would target a record low interest rate . It would keep the rates at ultra low levels for some time to come and would use all too to promote the resumption of a sustainable growth and to preserve price stability, a reputed paper reported today. The aggression of ( Fed ) statement caught the markets by surprise. Mohammad El-Arian, chief executive of a company and whose views are revered by all said " it was an incredibly strong public declaration that the Fed will throw everything it has in attempting to stabilise the financial and economic situation"
The European Central Bank (ECB) will take the cue from the Fed Reserve and announce rates cut Dollar dropped sharply against euro and other major currencies for the second day in a trot , a sign that currency markets were nervous about newly printed dollar flooding the market. The consumer price index fell 1.7 per cent in November, steepest monthly drop since government started tracking price in 1947. Labour market condition has deteriorated, and data indicated that consumer spending, business investment and industrial production have all declined. Retailers like Saks, Wal-Mart and Banana Republic are offering $50 rebate over any purchase exceeding $125. Fed said the outlook for economic activity has weakened and acknowledged that "inflationary pressures have diminished appreciably". Fed said the biggest threat right now was not inflation but deflation.
Meanwhile, Saudi Arabia which had so long firmly stood against any move to cut oil production to stabilise the steadily dipping price has openly supported the move to drastically cut production to counter collapsing oil price that have plunged more than $100 a barrel since July this year. Saudi Arabia has proposed a cut of 2.0 million barrel a day on top of the 2.0 million cuts already pledged in stages over the past three months to offset the effect of the global slow down on demand for oil.
The Organisation of Petroleum Exporting Countries (Opec) is in an emergency meeting in Algeria. We know that supply is still somewhere in excess of demand. inventories are also higher than normal. Therefore to bring things in balance there will be a cut of about million barrels per day, Saudi Arabia's oil minister Ali-al-Naimy was quoted as saying. Russia although not a member of Opec will support cartel's move.