The Fed cut its benchmark federal funds rate from 5.25% to 4.75%, sending US shares up sharply.
Analysts had expected a cut to prevent a housing market downturn and the credit crunch from denting the economy, but the size of the cut surprised many.
Some analysts had also wanted the Fed to leave rates on hold to focus on controlling inflation, arguing that a cut would lead to the "cheap money" conditions that had brought boom-and-bust to the property sector in the first place.
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