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Economy in Brief

FOMC Takes Aggressive Action
by Tom Moeller January 22, 2008

After an unscheduled meeting, the Federal Open Market Committee today lowered the Federal funds rate by seventy-five basis points to 3.50%. It was the largest cut in the rate since October 1984, followed thereafter by moves either in 25 or 50 basis point increments. The rate was last at 3.5% in August of 2005.

Voting against the decision was St. Louis Fed President William Poole.

The discount rate also was reduced seventy-five basis points to 4.00%.

"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth." It came ahead of next week's regularly scheduled meeting of the FOMC.

Worried about even further deterioration in U.S. economic conditions, the Fed indicated that "Appreciable 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."

Still expressing some caution, the FOMC indicated only "that it will be necessary to continue to monitor inflation developments carefully."

For the complete text of the Fed's latest press release please follow this link.

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