Fed Cuts U.S. Interest Rates

Expects economic growth to cool

The Federal Reserve, in a widely expected move, announced it had cut its federal funds short-term interest rate by a quarter of a percentage point to 4.50%. It said that economic momentum was likely to slow in coming months. The rate cut was welcomed by Wall Street which had been hoping for a reduction in borrowing costs.

"The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction," the Fed said.

The Fed said its policymakers had acted to help shore up the housing market, which has been in a slump since early 2006, and in a bid to keep the world's largest economy keep growing at a "moderate" clip.

The central bank's move will likely also offer some relief to ailing credit markets which have tightened as major commercial banks have sustained hefty losses tied to mortgage-backed securities. It is also likely to be appreciated by American consumers who will be able to benefit from lower borrowing costs.

Copyright Agence France-Presse, 2007

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