December 16, 2008

Fed cuts lend rate to new low

The U.S. Federal Reserve Tuesday cut the federal fund rate from 1 percent to a range between zero percent and 0.25 percent, the lowest in its history.

Although inflationary pressures have diminished considerably, the Fed said that the labor market, consumer spending, business investment and industrial production have all declined.

Financial markets remain quite strained and credit conditions tight, the Federal Open Market Committee said in a statement.

The focus ... going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures, the statement said.

The Fed's board unanimously approved the action, which exceeded the consensus expectation of a 0.5 percentage point cut. Economists also had not predicted the Fed would set a range for the rate banks used to lend each other money overnight, The Wall Street Journal reported.