Fed cuts rate again; two cuts in nine days

Last Revised on January 31, 2008

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On fears of a recession, the Federal Reserve drops interest rates by a half-point. The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.

This Federal rate cut action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.

In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that “financial markets remain under considerable stress.” The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed’s Dallas regional bank, dissented, preferring no change in rates.

The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.

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