Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington.The Federal Reserve, which began the year aggressively fighting a severe credit crunch and economic weakness, may push the pause button after delivering perhaps one more quarter-point cut in interest rates.
The Federal Reserve has cut a key interest rate by a quarter-point, a smaller move than the aggressive easing it undertook earlier this year.
The Fed action, announced Wednesday after a two-day regular meeting, pushed the federal funds rate down to 2 percent, its lowest level since late 2004. It marked the seventh consecutive rate cut by the central bank since it began easing credit conditions last September to combat the growing threat of a recession brought on by a deep housing slump and credit crisis.
The rate cut will mean lower borrowing costs throughout the economy as banks reduce their prime lending rate, the benchmark for millions of consumer and business loans.
The Fed move was in line with expectations. Wall Street believes this could well wrap up the Fed's rate cuts unless the economy threatens to fall into a worse slump than currently expected.
The Fed said it stood ready to "act as needed to promote sustainable economic growth and stability." That phrase was seen as a signal that the Fed is as worried about weak growth as it is about the risk of higher inflation.
The Fed devoted portions of its statement to both the threats of weakness and the threats that inflation could pose, likely reflecting the debate inside the central bank.
There were two dissents from the move, with both Richard Fisher, president of the Dallas regional Fed bank, and Charles Plosser, head of the Philadelphia Fed, arguing that the central bank should make no change in rates.
The central bank is walking a tightrope, trying to jump-start economic growth while also confronting the risk that if it overdoes the credit easing it could make inflation worse down the road.
Many economists believe the country has fallen into a recession. However, the government reported Wednesday that the overall economy, as measured by the gross domestic product, managed to eke out a 0.6 percent growth rate in the January-March quarter, barely in positive territory.
Associated Press Got a question or a comment? Send us an email.
Although the Hollister Free Lance does not have any obligation to monitor this board, the Hollister Free Lance reserves the right at all times to check this board and to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable to the Hollister Free Lance in our sole discretion and to disclose any information necessary to satisfy the law, regulation, or government request. The Hollister Free Lance also reserves the right to permanently block any user who violates these terms and conditions. All threats to systems or site infrastructure shall be assumed genuine in nature and will be reported to the appropriate law enforcement authorities. Submission of any comments will be considered permission to use online or in print.
Students warm up for school
