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Fed Makes Second Deep Cut to Interest Rates

The Federal Reserve voted to cut a key interest rate another half-percentage point to 3 percent on Wednesday, barely a week after the previous cut, signaling the central bank's desire to stabilize the faltering economy.

The move to pare the federal funds rate was announced at the end of a two-day meeting of the Fed's policy-setting Federal Open Market Committee. The cut had been widely anticipated on Wall Street, where analysts expected at least a quarter-percentage point cut but had hoped for more.

The move to cut the federal funds rate by 50 basis points came on a unanimous decision.


The Fed's announcement comes close on the heels of last week's surprise three-quarter point cut in the same benchmark rate — its biggest single decrease in more than two decades.

In explaining its aggressive move last week, the Fed said the outlook for economic growth had weakened and downside risks had risen. Policymakers also said businesses and households were beginning to feel the pinch of tighter credit.

In a statement, the Federal Reserve said that taken together, the two moves "should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain."

The economy's weaker-than-expected performance in the fourth quarter — an anemic 0.6 percent growth rate — along with housing and labor concerns, also played a role in the Fed's decision.

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