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Further cut in US interest rates | Further cut in US interest rates |
(10 minutes later) | |
The Federal Reserve has cut its key interest rate from 2.25% to 2.0% as it aims to avoid a possible US recession. | The Federal Reserve has cut its key interest rate from 2.25% to 2.0% as it aims to avoid a possible US recession. |
It is the seventh rate cut since last September, when the federal funds rate was cut from 5.25% to 4.75%. | |
Opinion was divided about whether the Federal Reserve's statement indicated that this would be the last cut in interest rates. | |
The economy has been hit by a housing market downturn and some analysts believe it is already in recession. | |
The Fed was somewhat more dovish this time and they can easily go both ways from here Michael Woolfolk, Bank of New York Mellon | |
"Recent information indicates that economic activity remains weak," the Federal Reserve's rate-setting committee said in a statement. | "Recent information indicates that economic activity remains weak," the Federal Reserve's rate-setting committee said in a statement. |
"Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters." | "Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters." |
'Downside risks' | 'Downside risks' |
But the statement did contain subtle indications that there may not be many more cuts to come. | But the statement did contain subtle indications that there may not be many more cuts to come. |
In the statement announcing March's rate cut, the committee said that the action taken so far should help to promote growth, but warned that, "downside risks to growth remain". | In the statement announcing March's rate cut, the committee said that the action taken so far should help to promote growth, but warned that, "downside risks to growth remain". |
The latest statement did not contain such a warning. | The latest statement did not contain such a warning. |
"The Fed was somewhat more dovish this time and they can easily go both ways from here," said Michael Woolfolk, at Bank of New York Mellon. | "The Fed was somewhat more dovish this time and they can easily go both ways from here," said Michael Woolfolk, at Bank of New York Mellon. |
"People were expecting a clear sign that the next move would be a pause, but the statement doesn't make that clear." | "People were expecting a clear sign that the next move would be a pause, but the statement doesn't make that clear." |
The cut came despite figures showing the US economy had grown faster than expected in the first three months of 2008. | The cut came despite figures showing the US economy had grown faster than expected in the first three months of 2008. |