US slashes interest rates to 2.25%
The Federal Reserve has slashed the US overnight lending rate by three quarters of percentage point to 2.25% in an attempt to alleviate the crisis besetting the country's banking system.
"Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity,'' the Federal Open Market Committee said in a statement.
The Fed Board of Governors also voted to lower the discount rate, the cost of direct loans to banks from the central bank, to 2.5% just two days after it was cut to 3%.
Two governors, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser dissented from today's decision and wanted a "less aggressive" response.
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It is the sixth cut in interest rates since last August when the credit crisis really began to bite.
"Recent information indicates that the outlook for economic activity has weakened further,'' the Fed said.
"Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters," it said though it added that some indicators of inflation expectations have also risen.
