Fed Cuts Rate by Half-Point; 2nd Reduction in 8 Days

Posted by Kendall Harmon

The Federal Reserve reduced short-term interest rates on Wednesday for the second time in eight days, meeting widespread expectations by investors on Wall Street for a big rate cut.

In lowering its benchmark Federal funds rate by half a point, to 3 percent, the central bank acknowledged that it is now far more worried about an economic slowdown than rising inflation, and it left open the possibility of additional rate reductions.

“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the central bank said in a statement accompanying its decision. In addition, it said, recent data indicated that the housing market is still getting worse and the job market appears to be “softening.”

Taken together, the back-to-back rate cuts totaling 1.25 percent amounted to the Fed’s most aggressive effort in years to head off a recession. By comparison, the Fed under Alan Greenspan reduced the overnight rate by only a half-point after the terrorist attacks on Sept. 11, 2001.

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Filed under: * Economics, PoliticsEconomy

2 Comments
Posted January 30, 2008 at 4:23 pm [Printer Friendly] [Print w/ comments]



1. William P. Sulik wrote:

I’m actually more worried by this move.  (of course, that won’t stop me from refinancing my house).

It’s time to lock in fixed payments—it looks like we’re heading to inflation like we saw in the late Carter years—inflation caused by Fed Chair Arthur F. Burns who was trying to make things better for Nixon.

January 30, 6:57 pm | [comment link]
2. harold wrote:

Early in the Reagan years the Fed increased interest to save the dollar.  While it caused a minor recession it was the price to pay to guard the American dollar as the currency of choice in the world and a safe haven.  It was considered essential and reversed inflation.
Yet the inept Bush administration and greedy Wal Street has twisted the arm of the Fed chairman to destroy the dollar for the sake of keeping things afloat for awhile which will have long-term negative implications for all Americans.

January 30, 11:20 pm | [comment link]
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