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Fed Lowers Funds Rate Due to Weak Economic Activity

March 18, 2008

The Federal Open Market Committee (FOMC) has lowered the federal funds rate another 75 basis points to 2.25 percent.

Citing slowed growth in consumer spending, a softening labor market and tighter credit conditions, the FOMC said its move was driven by further weakness of the outlook for economic activity.

“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,” said the FOMC.

Despite a rise in inflation, the FOMC expects pricing to level soon.

“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,” projected the FOMC. “Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.”

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