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 Germany Balances Budget for First Time Since 1969 ...
Clinton impeacher Hyde dead at 83 ...
US spending slow despite rate cut ... 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 said.

"Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labour markets."

Weak growth

Data released earlier showed weak economic growth in the final three months of 2007 as the housing market slump deepened and consumer spending cooled.

Growth slowed to an annual rate of 0.6% between October and December, half the rate forecast and compared with a brisk 4.9% growth rate in the previous three months.

Analysts said that the drastic action taken by the Federal Reserve would probably remove the need to cut rates again in the short term.

"The language in the statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the US economy," said Mark Meadows, a market analyst at Tempus Consulting.

"This move, combined with last week's cut, should be enough for them to address some of these worries and they are probably done for now."

Many economists are forecasting the US economy will enter a recession this year as turmoil in housing and financial markets begins to hurt ordinary households.

A $146bn (£73bn) economic stimulus package has been proposed by President George W Bush in an attempt to ward off a recession.

The measures include rebates for people with lower incomes as well as tax incentives for businesses.

(BBC)

<< Back