Today, the Federal Reserve and six other major banks cut interest rates in an attempt to prevent the financial crisis from becoming a global economic meltdown. The Fed reduced its key rate from 2% to 1.5%. Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5% after the Fed announcement. The Bank of England cut its rate by half a point to 4.5%. The European Central Bank cut its rate by half a point to 3.75%. The central banks of China, Canada, Sweden and Switzerlalso cut interest rates. Wall Street and others were cautious about the impact of the central banks' coordinated action. The Dow Jones industrials and other indexes seesawed between positive and negative territory in early trading. In early trading, European stocks fell about 5% and Asian stock indexes fell more than 8%. Japan's stock market plummeted 9.4% — its biggest one-day drop in 21 years. Trading on both Russian stock markets was suspended — on one until Friday and the other until further notice — after shares plunged within the first hour of trading. The worldwide gloom follows a sell-off in U.S. markets late Tuesday, where major stock indexes fell 5%. The rout brought the Dow Jones industrials' losses to more than 875 points in two days, and its close was the lowest close in five years. The blue chip index is now a stunning 33.3% below its record close of 14,164.53 a year ago.
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