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Fed Cuts Rate to 3.5 Percent

January 22, 2008

The Federal Open Market Committee (FOMC) once again lowered its target for the federal funds rate yesterday, this time by 75 basis points to 3.5 percent.

“The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth,” said the FOMC in a statement Tuesday. “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households.”

The FOMC cited continuing problems in the housing and labor markets, which could put increased stress on the economy.

In 2007 the Federal Reserve cut the federal funds rate three times, Sept. 18, Oct. 31 and Dec. 11. This most recent cut brings the total cut since September to 175 basis points.

The next meeting for the FOMC is scheduled for Jan. 29-30. Analysts predict another cut could be decided then.

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