The US Federal Reserve lowered a key interest rate by a quarter point to 2.0 percent on Wednesday, with the Fed hinting that this could be the last in a series of moves to boost the slowing economy.
However, it kept its options open and financial markets saw some chance more rate cuts could be in store.
In announcing its decision, the
“The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity,” the central bank said.
While the Fed said uncertainty on the outlook for prices remained high, it also said it still believed inflation would moderate over time, which some analysts saw as suggesting the possibility rates could move lower. Two Fed officials dissented from the decision to cut rates, preferring no change.
“This statement strongly implies that the Fed will be on pause for some time,” said Joseph Brusuelas,
The Fed’s action takes the bellwether federal funds rate, which banks charge each other for overnight loans, to 2 percent, the lowest since December 2004. It was the seventh reduction in a campaign that has brought the key lending rate down by 3.25 percentage points since mid-September.
The central bank also lowered the discount rate it charges on direct loans to banks to 2.25 percent from 2.5 percent.
President George W. Bush on Tuesday said the
While the growth rate was a bit stronger than economists had expected, it reflected a buildup in inventories that may weigh on the economy in coming months.
Other details in the report were decidedly weak.
Consumer spending, which accounts for two-thirds of
Fed Chairman Ben Bernanke told Congress on April 2 that “recession is possible,” adding that the Fed believed there might be a “slight contraction” in the economy in the first six months of the year.
At the same time, with gasoline prices heading toward $4 dollars a gallon and strong global demand pushing up food prices, some Fed officials have worried that a desire to bolster the economy could divert the central bank’s attention from inflation pressures.
In addition to rate cuts, the Fed has taken a number of emergency steps to ease credit strains that have threatened to make the economy’s ills worse, pumping billions of dollars into markets to keep them from choking on mortgage-related bets.
At their meeting on Wednesday, Fed officials discussed a new measure—paying interest on commercial bank reserves held at the central bank—that could improve their ability to provide liquid funds to the market.
The Fed has also mulled whether expanding the size of its term auction facility cash auctions for banks and extending the duration of those loans beyond 28 days could help ease still-tight credit conditions.
Date created : 2008-04-30