Fed Cuts Base Rate 3.0%

Jan. 30, 2008
Fed says it should help promote moderate growth rate

In its second reduction in eight days to help stimulate the U.S. economy, the Federal Reserve cut its base federal funds rate a half-point Jan. 30 to 3%.

The action came a week after an emergency cut of 0.75 percentage points in the face of a global market rout amid concerns the U.S .economy was headed toward recession.

"Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," the Federal Open Market Committee said. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets."

"Todays policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity," the Fed's statement said."However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."

The cuts in the federal funds rate, used for overnight interbank loans, can help lower a wide range of borrowing costs for consumers and businesses, and as such can help spur activity in an economy buffeted by the worst housing slump in decades that has spilled over to the financial sector.

As the Fed members met, the Commerce Department reported U.S. economic growth slowed dramatically to a 0.6% annual pace in the fourth quarter of 2007 amid a worsening housing slump and a related credit squeeze.

Copyright Agence France-Presse, 2008

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