US Central Bank Cuts Key Interest Rate by Half Point

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30 January 2008

For the second time in just over a week, the U.S. Central Bank has cut interest rates to try to spur a slowing economy. From Washington, VOA's Michael Bowman reports.

Last week, the Federal Reserve aggressively cut a key short-term interest rate by 0.75 percent in what was seen as an emergency move to reassure global financial markets that plunged amid worries of a possible U.S. recession.  Now, the Fed has acted again, slashing the so-called "federal funds rate" - which banks charge each other on overnight loans - by another half percent to three percent.

In a statement, the central bank said, given current economic conditions - including a depressed U.S. housing market, a credit crunch, and market volatility - further rate cuts could be forthcoming.

The Fed actions are good news, according to economist Mark Zandi of the credit rating agency Moody's Economy.com:

"With a little bit of luck and some good policy-making - the Federal Reserve is lowering rates - with some fiscal stimulus, we may be able to get out of this [economic situation] without a full-blown, broad-based recession," he said.

Earlier Wednesday, the Commerce Department reported the U.S. economy grew at an anemic 0.6 percent in the last quarter of 2007, for a total expansion of 2.2 percent for the year. That is the lowest growth rate since 2002, when the United States was struggling to recover from a recession made more severe by economic shockwaves resulting from terrorist attacks the previous year.