Fed interest rate cut lower than predicted

MANY Fed watchers expected the US central bank to cut its key interest rate by a full 0.5%, in a repeat of its action on September 18.

But the Fed has more than the flagging US economy and a nervous global banking sector on its mind.

Its comments on Wednesday, when it cut rates by 0.25%, that it had concerns about inflation signalled to the markets that it is not going to rush in with another cut next month. That seems to be the view of the markets who bought the dollar yesterday in favour of oil resulting in a slight recovery in the currency and a fall of more than $1 in the price of a barrel of oil.