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Fed Cuts Key Interest Rate To Near Zero

The Federal Reserve on Tuesday cut its target for a key interest rate to the lowest level on record and pledged to use "all available tools" to combat a severe financial crisis and prolonged recession.

The Fed slashed its key short-term interest rate to a range of zero to 0.25 percent — down from the 1.0 percent target set Oct. 29. Many analysts had expected the Fed to make a smaller cut to 0.5 percent.

"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the central bank said in a statement. "In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time."


Fed policymakers said that since their last meeting, "labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further."

Inflation pressures have "diminished appreciably," the Fed said, and in light of lower prices for energy and other commodities and "weaker prospects for economic activity," inflation is expected to moderate further in coming quarters.

The Fed also said it "will continue to consider ways of using its balance sheet to further support credit markets and economic activity."

From NPR staff and wire reports

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