The central bank's decision takes the bellwether federal funds rate target down to 4.25 percent. While the action was widely expected, some economists had thought the Fed might offer a bolder half-point reduction in the rate, which governs overnight lending between banks.
WASHINGTON (Reuters) - The Federal Reserve cut a key interest rate by a quarter-percentage point on Tuesday to help the U.S. economy withstand tightened credit and a prolonged housing slump.
The central bank's decision takes the bellwether federal funds rate target down to 4.25 percent. While the action was widely expected, some economists had thought the Fed might offer a bolder half-point reduction in the rate, which governs overnight lending between banks.
In a related move, the Fed trimmed the discount rate it charges for direct loans to banks by a matching quarter point to 4.75 percent.
The Fed has now cut overnight rates, their key economic policy lever, by a full percentage point since mid-September in an effort to put a floor under an economy increasingly seen at risk of falling into recession.
!ADVERTISEMENT!(Reporting by Mark Felsenthal and David Lawder; Editing by Tim Ahmann)
