Overview

America's Federal Reserve cut its federal funds rate by yet another half a percentage point, to 4%. Industrial output had fallen by 0.3% in April, the seventh monthly decline in a row. Playing down fears of a rekindling of inflation, the central bank's statement appeared to foreshadow another rate cut at its meeting in June. Consumer prices rose by less than expected in April—only 0.4%. Producer prices climbed moderately, though food prices jumped by 0.6%. The markets barely reacted on the day of the cut, but the Dow Jones gained 3.2%, rising above 11,000 for the first time since last September.