Many economists believe the US economy is already in recession
|
The central bank lowered rates to 2.25% from 3%, but the cut was smaller than financial markets had expected.
Many economists believe the US economy is already in a recession.
The Fed has taken strong action this week to avert a financial panic after investment bank Bear Stearns was forced into a fire sale to avoid collapse.
US Treasury Secretary Henry Paulson admitted earlier on Tuesday that the economy was facing a "sharp decline" at the moment, but hoped for a recovery later in the year.
Aggressive action
 |
The
Fed's action is yet another forceful move in its attempts to alleviate
the liquidity crunch and to shore up a rapidly weakening economy,
 Arun Raha, senior economist at Swiss Re
|
The Fed has now lowered rates six times since mid-September, with the economy reeling from the credit crisis that was triggered by a slump in the US housing market.
"Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity," the Federal Reserve said.
US shares initially trimmed gains after the Fed's announcement but the benchmark Dow Jones industrial average later resumed its ascent.
Wall Street rallied earlier after two leading investment banks, Goldman Sachs and Lehman Brothers, reported smaller falls in profits than analysts had been expecting.
The dollar, which has been hitting record lows against the euro, gained ground.
Recession fears
The Fed is hoping its actions will stave off both a recession in the wider economy and go some way to ease unprecedented conditions in the financial system.
"The Fed's action is yet another forceful move in its attempts to alleviate the liquidity crunch and to shore up a rapidly weakening economy," said Arun Raha, senior economist at Swiss Re.
As the economy worsens, banks and financial institutions are calling in loans and becoming increasingly reluctant to lend money, particularly to borrowers considered to be high risk.
Bear Stearns got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis.
"There can be no health in the economy until the banking system is working properly," said K Daniel Libby at Sands Brother Select Access Fund.
Inflation concerns
The Fed expressed some concern about inflation in the statement that accompanied the interest decision. Analysts said this could signal that an end to the current cycle of rate cut cycle was fast approaching.
"The economy is in, or close to, a recession, but increasing oil prices have kept inflationary pressures from abating, complicating the Fed's task," said Mr Raha.
US producer prices, released on Tuesday, rose by 0.3% in February compared to the month before, but a key measure of producer core inflation rose by 0.5%, the fastest pace in well over a year.
There were also signs of opposition inside the Fed to the aggressive moves.
Two members of the central bank's rate-setting Federal Open Market Committee voted for a smaller cut in rates.
"By cutting 75 points rather than 100 points, the Fed sought to restore leadership over the market and indicate that its actions would not be entirely dictated by market expectations," the Bank of New York said.
By William Sharrock
----------------------------------------------
Black hole 'bully' blasts galaxy
Galaxies have been seen colliding before, but it is the first time this form of galactic violence has been witnessed by astronomers.
This could have a profound effect on any planets in the jet's path and could also trigger a burst of star formation.
The findings are to be published in the Astrophysical Journal.
They were obtained using Nasa's space-based Chandra X-ray Observatory, its Hubble Space Telescope, and Spitzer Space Telescope, as well as the Very Large Array (VLA) and Merlin radio telescopes on the ground.
The event is occurring in a system called 3C321, which lies 1.4 billion
light-years from Earth. It contains two galaxies in orbit around one
another which are in the process of merging.
It is like a black hole bully, punching the nose of a passing galaxy
Most, if not all, galaxies - including our own Milky Way - are thought to host supermassive black holes at their galactic centres. A handful of these galaxies eject powerful jets from the vicinities of their black holes, and are known as radio galaxies - because jets are very "visible" at radio wavelengths.
The larger of the two galaxies in 3C321 - dubbed the "death star galaxy" by the astronomers - has a jet emanating from the vicinity of the black hole at its centre. The unfortunate smaller galaxy has apparently swung into the jet's line of fire.
Destructive force
A bright spot in some images shows where the jet has slammed into the side of the companion galaxy, dissipating some of its energy. After striking it, the jet has become disrupted and deflected.
Jets can race out at close to the speed of light and can travel vast distances. The jet in 3C321 was about 1,000 light-years across and might have travelled one or two million light-years from its origin.
These jets consist of high energy particles and magnetic fields. They
produce enormous amounts of radiation, especially in the form of
high-energy X-rays and gamma-rays.
"We've seen many jets produced by black holes, but this is the first time we've seen one punch into another galaxy like we're seeing here," said Dan Evans, lead author from the Harvard-Smithsonian Center for Astrophysics in Cambridge, US.
"This jet could be causing all sorts of problems for the smaller galaxy it is pummeling."
The combined effects of this radiation and particles travelling at almost the speed of light could have disastrous consequences for the atmospheres of any Earth-like planets lying in the path of the jet.
For example, protective layers of ozone in the planet's upper
atmosphere could be destroyed, which could result in the mass
extinction of any life that had evolved on the planet.
Although we call it a death star galaxy, it might eventually be a source of new life in the more distant galaxy
Neil Tyson, director of the Hayden Planetarium in New York commented: "Black holes are famous for wreaking havoc on their environment. This particular black hole is disrupting its local region by dining on matter that wanders too close - which is the source of the energy for this jet.
"It also fires a jet out of the galaxy. So it is like a black hole bully, punching the nose of a passing galaxy."
Basic properties
"There are still basic unanswered questions about how these jets work," said co-author Martin Hardcastle of the University of Hertfordshire, UK.
"We don't know how exactly they're generated close to the black hole, what they're made of, how fast they're going, or how they evolve with time. So an object like 3C321 can act as an experiment which can give us an insight into the inner working of the jet."
The effect of the jet on the companion galaxy is likely to be substantial, because the galaxies in 3C321 are extremely close to one another. At only about 20,000 light years apart, these galaxies lie approximately the same distance as the Earth is from the centre of the Milky Way.
It is possible that it would not all be bad news for the galaxy being struck by the jet. The massive influx of energy and radiation from the jet may induce the formation of large numbers of stars and planets once its initial wake of destruction is complete.
"Although we call it a death star galaxy, in the end it might be a source of new life in the more distant galaxy," said Dr Hardcastle.
Features seen in images from the VLA and Chandra indicate that the jet started hitting the smaller galaxy about one million years ago. This is a blink of the eye in the lifetime of 3C321, which marks it out as an important opportunity to study a rare astronomical phenomenon, say the astronomers.
By William Sharrock
----------------------------------------------
Pul-e-Charkhi lies on the eastern outskirts of Kabul
|
Gunfire has been heard from the Pul-e-Charkhi prison, a huge complex built in the 1970s on the outskirts of the capital, Kabul.
Inmates are in control of parts of the prison and say they have taken two Afghan soldiers hostage.
Pul-e-Charkhi is now used to house common criminals as well as al-Qaeda and Taleban suspects.
Protest
Our correspondent says the stand off between prisoners and Afghan security forces, which began on Sunday, appears to be worsening.
Large numbers of soldiers and police have been arriving at the notorious jail which houses some of Afghanistan's most dangerous criminals and Taleban militants.
Inmates had taken control of sections of the building as part of a continuing protest against the authorities.
A number of prisoners contacted the BBC by mobile phone and said that seven inmates had been injured.
They also said that two Afghan national army soldiers had been captured and they would be killed unless mediators were sent in to resolve the dispute.
Our correspondent says it has not been possible to verify if the soldiers had been held.
There has been no official response from the Afghan government, but the defence minister told parliament an operation was being planned to raid the prison after parts of the building were overrun.
An Afghan member of parliament who visited the jail on Monday said the situation had become very tense.
The dispute has been going on for two weeks since an attempted jail-break and the arrest of a large number of prison visitors.
There have been sieges and riots in the past at the prison.
Four years ago the jail was raided by the military after some prisoners tried to escape.
By William Sharrock