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Federal funds rate reduced by 25 basis points to 2 percent


The U.S. Federal Reserve on Wednesday lowered the federal funds rate by 25 basis points to 2.00 percent. It also cut the discount rate by 25 basis points to 2.25 percent. It is the seventh rate cut since last September, when the federal funds rate was cut from 5.25% to 4.75%.

Following is the press release of Federal Open Market Committee
(April 30, 2008)-


The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent. Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.

Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months.

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 remains high. It will be necessary to continue to monitor inflation developments carefully.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity.

The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 2-1/4 percent.



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