The US federal bank attempted to calm investors’ nerves by implying that an interest rate cut is imminent causing Wall Street to make gains.

Christopher Dodd, a top US lawmaker, told reporters after a meeting with the Ben Bernanke, the Federal Bank Chairman, that the bank was prepared to take any necessary steps to calm the markets.

In other parts of the economy, signs of the credit squeeze are beginning to emerge. Companies involved in mortgages are downsizing and have announced job cuts. Capital One a major player in the US mortgage market announced job cuts of 1,900, while Suntrust bank announced cuts of 2,400 jobs by the end of 2008.

In a further development, the Bank of England revealed that an undisclosed commercial bank borrowed 314 million pounds on Tuesday. A number of banks are privy to a special arrangement where the Bank of England can lend an unlimited amount at a penalty of 6.75 per cent, a percentage point above the bank’s base rate. This has been the first time that this credit facility offered by the Bank of England has been used.