The Federal Reserve cut a key interest rate by three-quarters of a point early today.
Ist he economy heading into a recession? Watch for more analysis from CBN News Financial Editor Drew Parkhill, following this report.
The Fed action was also a sign that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.
The move came after international stock markets took another hit overnight. Overseas investors are worried that the United States might be headed into a recession.
From Tokyo to China, India and Australia -- the sell-off intensified in the Asian stock markets with two back to back days of panicked trading.
Japan's Nikkei Index tanked 5.65 percent -- its biggest drop in nearly 10 years.
Australia's benchmark saw its steepest slide in nearly 20 years -- falling seven percent.
And, Hong Kong's Hang Seng, down by nearly nine percent.
Investors fear that trend will follow across Europe and to the U.S. amid increasing concern that the American economy is heading toward a recession.
"This is very severe, really what it's doing is it's affecting confidence, so you'll see the impact of that over the next six to nine months," said Geoff Wilson with Wilson Asset Management.
Foreign markets worry that an economic downturn here in the U.S. -- with the credit crisis, housing slump, and American consumers tightening their spending - will weaken demand for products from other countries - spreading a U.S. slowdown around the world.
"People are still apprehensive and people want to see how the U.S. market reacts to the global financial crisis tonight," said Francis Lun, general manager of Fullbright Securities Ltd.
And in Washington, there's an air of urgency to get something done quickly.
The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Officials decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."
Last week, President Bush and Congress dicussed an emergency plan to stimulate growth, including giving tax rebates to American families -- meant to inject a financial shot in the arm to the economy by increasing consumer spending.
But global investors are obviously giving those ideas a vote of no confidence. So we could see more measures from Washington - including serious interest rate cuts from the Federal Reserve.