国际英语新闻：U.S. Fed slashes key interest rate to fend off recession

The U.S. Federal Reserve decided Tuesday to cut a key interest rate by 75 basis points to 2.25 percent in order to prevent the economy from slipping into recession.

    "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," said the Fed in a statement.

Traders work on the floor of the New York Stock Exchange Mar. 17, 2008. The U.S. Federal Reserve decided Tuesday to cut a key interest rate by 75 basis points to 2.25 percent in order to prevent the economy from slipping into recession.

However, downside risks to growth remain, the Fed noted, adding it will "act in a timely manner as needed to promote sustainable economic growth and price stability."

    The Fed has cut overnight rates by 2.25 percentage points to 3 percent since mid-September as a rise in defaults on subprime mortgages has escalated into a financial crisis.

    The Fed decision on Tuesday had been expected by Wall Street. In the minutes just before the Fed decision, the Dow Jones industrial average jumped some 200 points.

    In the statement, the Fed explained that recent information indicates that the outlook for economic activity has weakened further.

    "Growth in consumer spending has slowed and labor markets have softened. 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.

    In a related action, the Fed unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent.

    Against the market upheaval, fears that a seizing up of the financial system could plunge the U.S. economy into deep recession have overtaken worries about inflation fueled by high oil and commodity prices, said the U.S. media.

    "With the recent market turbulence, those inflation concerns are now taking a backseat, and the (Fed) has to think about the action that not only is appropriately aligned with the forecast but that also supports financial markets at a time of extraordinary turbulence and systemic risk," Laurence Meyer, a former fed governor now with forecasting firm Macroeconomic Advisers, said in a note to clients.

    The U.S. central bank also expressed concern about the risk of inflation in the statement, saying "inflation has been elevated, and some indicators of inflation expectations have risen."

    The Fed "expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization," said the statement.

    "Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully," it stressed.

    The vote to cut rate on Tuesday was not unanimous. Dallas Federal Reserve Bank President Richard Fisher and Philadelphia Federal Reserve Bank President Charles I. Plosser dissented. They preferred a less aggressive action this time.

    Cary Leahey, economist at Decision Economics, said some market participants were disappointed that the cut was not the 100 basis points many had expected and the two dissents also signaled a lack of consensus.

    "The Fed was worried more about inflation than I thought they would have," Leahey also noted.

    As the Fed slashed the key interest rate, President George W. Bush also voiced that his administration is prepared to take fresh action, if necessary, to bolster the flagging U.S. economy and financial sector.

    "If there needs to be further action we'll take it," Bush said during a speech in Florida on trade.

    "In the long run, Americans ought to have confidence in our economy," said the U.S. leader. "I understand there's short-term difficulty, and I want people to understand that in the long run we're going to be just fine."