The Federal Reserve slashed its official cash rate by 50 basis points to three per cent over night.
This follows a 75 basis points cut to the cash rate on 22 January 2007.
According to the Federal Open Market Committee (FOMC), which determines the Federal Reserve’s monetary policy, financial markets remain under considerable stress and credit has tightened further for some businesses and households.
“Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labour markets,” the FMOC said.
The FMOC said it hopes its latest action, combined with previous cuts, will promote moderate growth over time and mitigate the risks to economic activity.
“However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks,” the FMOC said.
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