WASHINGTON - The U.S. central bank cut its key interest rate Tuesday by a drastic 0.75 percent, in an effort to pull the world’s largest economy out of a deepening recession.
Top officials of the U.S. Federal Reserve pushed the benchmark rate to a record low, between zero and 0.25 percent.
In a note explaining the action, Fed officials said key economic drivers like consumer spending, business investment and industrial production have all declined, and the economic outlook has weakened further.
The rate cut is intended to cut borrowing costs and make it easier for companies to get the money needed to expand and hire new people.
The Fed pledged to employ “all available tools” to restart economic growth, and said the exceptionally low interest rates may be in place “for some time.”
Officials also said they will continue efforts to unfreeze the credit market by increasing the amount of money in circulation.
U.S. stock markets rallied in anticipation of the rate cut and rose further after the announcement.
The rate cut follows a continuing series of disappointing economic reports. The latest shows consumer prices falling by a record amount in the United States in November, as the recession cut demand.
A separate report said the number of new homes under construction in the United States fell by a record amount in November, reflecting continued problems with tight credit.
President-elect Barack Obama says as the key interest rate gets cut close to zero, the Fed is running out of the kind of “ammunition” traditionally used to fight recessions. He says officials still have other “tools” available, but it is time for all branches of government to step up to cope with the economy. Mr. Obama also said officials expected to serve in his administration are crafting an economic recovery plan that will focus on improving infrastructure and providing jobs.
Even the largest Wall Street firms are getting hurt by the recession. Goldman-Sachs reported a loss of more than $2 billion for one three-month period. The financial crisis has pushed many other banking and investment firms out of business.
Source: VOA News
