INSTANT VIEW: Fed cuts target rate in surprise move by 75 bps

NEW YORK (Reuters) - The U.S. Federal Reserve on Tuesday slashed the benchmark federal funds target rate by 75 basis points to 3.5 percent in a surprise intermeeting decision.

COMMENTS:

TAMMO GREETFELD, EQUITY STRATEGIST, UNICREDIT MARKETS &

INVESTMENT BANKING, MUNICH:

"The short-term impact from a psychological point of view is a positive one. However the markets should soon refocus on the question of how quickly interest rate cuts as well as the fiscal package will be able to turn the market around and provide a lasting floor for stabilization.

Here, markets were not convinced that this would be possible. That was one of the main features of the last couple of trading days and so most likely the Fed rate cut will only deliver temporary relief.

The equity markets will need a prolonged period of a bottoming phase in order to find a new basis for a new sustained uptrend. That will be a process that will take some time and that is not a done deal by one decision.

Our view was this morning and still is that after this drop there will be short-term trading opportunities in equities but there is no urgency to go overweight equities now as a long bottoming phase is expected and there will be opportunities then."

LAURENT TIGNARD, CHIEF EXECUTIVE OF THE EUROPEAN UNIT OF

HALBIS, THE ACTIVE FUND MANAGEMENT ARM OF HSBC, PARIS:

"It shows there is a real risk of a slowdown in the United States.

"(The Bank of England and the European Central Bank) will likely follow the Fed's example. But they won't cut as much because the situation (in Europe) is less problematic (than the one in the United States."

JENS-OLIVER NIKLASCH, ANALYST AT LBBW, STUTTGART:

"This is a powerful adrenaline injection for the markets. But one knows that with this kind of drug you usually need to increase the dosage."

"The Fed has apparently taken into account the risk stemming from the financial markets. There was a danger that it could have led to a downward spiral. The Fed has taken timely action."

"It is also interesting that they have left themselves room for further moves. The financial markets know that the Fed is determined to act. But it is also implicit that the Fed sees the recession risk as massive. From that point of view the question is how this will play out in the markets."