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US Hopes to boost markets - 19 March 2008

The US Federal Reserve has decided to cut interest rates further in an attempt to kick-start the economy. The move to reduce rates for the second time in 2008 by three-quarters of a percentage point comes as the Bank of Japan is also set to announce its own cut in response to what is becoming a global crisis on stock markets.

The US government has admitted for the first time that the economy of the country is shrinking, confirming what most homeowners, stock market investors and exporters in the country have known for months. Market response to the interest rate cut has been somewhat cautious given recent events and the likelihood that further turbulence on the currency and stock markets is more than likely.

This latest cut in the US interest rate is seen as the final act in a week of emergency measures taken by the Federal Reserve in an attempt to save the economy from a downturn that experts are predicting could last well into 2009. Other emergency measures taken by the Fed have included pumping billions of Dollars into the money markets to try to stimulate the banking system into lending, and announcing a new facility of ‘team securities lending’, allowing primary lending institutions to present a wider range of collateral in order to secure lending, including mortgages.

The twin effects of the credit crunch as a result of the sub-prime mortgage crisis in the US housing industry and the suffering of the Dollar on the international money markets has resulted in some impressive discounts becoming available on new property in the US. Developers in some parts of the country, including Florida, are said to be offering discounts of up to 40 per cent on new houses and condos. Similar discounts are likely to be found elsewhere in the country as well, allowing UK buyers to take advantage of the issues in the US markets and to invest in properties in a country that might otherwise have been beyond their reach.

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