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The Federal Reserve decided to lower its target for the federal funds rate 75 basis points to 2-1/4 percent. “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”, the Fed states.
“Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened”, the Fed statement continues. “Inflation has been elevated, and some indicators of inflation expectations have risen.”
“The Committee 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. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.
“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. However, downside risks to growth remain.