US cuts interest rates

US cuts interest rates
19 September 2007 - Melbourne Australia

By Al Robinson

• US cuts interest rates
• RBA to let market counter inflation
• Qantas, Jetstar offer carbon offsets for passengers
• NAB may look at British takeovers
• Aussie wheat crop down, prices higher

Overseas Markets

Name	Yesterday's Close	% Change
DJIA	13739.39	2.45
FTSE 100	6283.30	1.60
Nikkei 225	15801.80	- 2.06
Shanghai	5425.21	0.07
CSI 300	5476.84	- 0.40
Gold	743.20	2.45
Crude Oil (BRENT FUTR)	77.59	1.04

The US Federal Reserve cut two key interest rates yesterday. It lowered the rates at which banks borrow from the Fed, and lend to each other, by 50 basis points. The US stock market reacted emphatically, having its biggest one-day gain in four years. The RBA, however, has signalled that it will leave Australian interest rates untouched for some time yet. Governor Glenn Stevens prefers to allow negative market forces brought on by credit conditions to take care of inflation. Qantas and subsidiary Jetstar will soon offer carbon credits for passengers. The companies are following Virgin Blue's lead; the discount airline adopted a similar program in March. NAB is considering buying out cheap British banks. The Northern Rock panic has meant lower share prices in the British banking sector. Meanwhile, The Australian Bureau of Agricultural and Resource Economics yesterday reduced its wheat crop forecast by 31%. Global wheat futures are rising accordingly.

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Market Soars As Fed Cuts Interest Rate
The Federal Reserve, America's central bank, has lowered the interest rate at which banks lend to each other by 0.50%. The move will make credit cheaper for institutions and individuals. The US share market reacted enthusiastically, rising 335 points.

Credit crunch delays rate rise
The Reserve Bank of Australia has indicated that it will leave interest rate changes on hold. Governor Glenn Stevens proposed that tightening of credit brought on by market conditions will counter inflation. But some analysts still believe that Australia's economic growth will induce a rate rise by the end of the year.