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| Fed cuts US interest rates to 3% |
| The Federal Reserve has cut interest rates for the second time in nine days as it tries to keep the US economy from entering a recession.
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| UNITED STATES OF AMERICA
, 31-January-2008
1:26:43 AM |
| The central bank lowered rates to 3% from 3.5% after a two-day meeting.
Last week, the Fed slashed the cost of borrowing by the largest amount in 25 years in a shock move to calm tumbling global stock markets.
The Fed is hoping the cuts will cushion the US economy from the worst effects of the credit crunch and housing slump.
"Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," the central bank's Federal Open Market Committee (FOMC) said.
"Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labour markets."
Markets pleased
The half a percentage point cut was bolder than some economists were expecting and it pleased financial markets
US shares reversed early losses and gained ground on hopes for a revival in economic growth after the Fed's aggressive action.
But the main Dow Jones stock index ended the day lower as investors took profits.
"The members recognise that the threats to the financial markets and therefore to economic growth remain and that they had to get the Fed into accommodation mode," said Joel Naroff at Naroff Economic Advisors.
"They have done so in a very dramatic fashion and have made the financial markets very happy."
The rate cut was approved by a nine to one vote.
Richard Fisher, president of the Fed's Dallas region bank, voted against the cut, preferring no change in rates.
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