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A world in crisis?

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A world in crisis? The US Federal Reserve unexpectedly cut interest rates by 75 basis points last week to 3.5 per cent, despite little economic data signalling recession. The rate cut, its biggest single-day move for more than 20 years, came ahead of a scheduled Fed meeting at the end of the month.

Ilian Mihov, INSEAD Professor of Economics, says the Fed's move was necessary to bring stability to the markets. "When the financial sector goes down, it starts spiralling in such a way that it's very difficult to restore confidence and bring back the economy on track."

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