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Fed Lowers Interest Rates by Half a Point

Fed joins global effort to spur economic growth

The U.S. Federal Reserve on Oct. 8 lowered a key U.S. interest rate by half a point to 1.5%, joining a coordinated world effort to spur economic growth and stem carnage on financial markets.

The Fed released a joint statement by central banks stating they had been in "continuous close consultation" throught the current financial crisis and "cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets."

"The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability," the statement said. "Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions."

The U.S. central bank said its Federal Open Market Committee had decided to lower its target for the federal funds rate by half a point "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures."

It also unanimously approved a half point cut in another key interest rate, the discount rate, to 1.75%, the statement said.

Copyright Agence France-Presse, 2008

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