The Federal Reserve Board yesterday cut its target for the federal funds rate 50 basis points to 1.5% in a move coordinated with other central bank rate cuts.
The Fed said the cut was prompted by “evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.”
While inflationary pressures have begun to moderate in many nations, as oil prices drop, ”inflation expectations are diminishing and remain anchored to price stability.” But the “intensification of the financial crisis” has enhanced downside risks to growth “and thus has diminished further the upside risks to price stability,” the Fed said.
“Some easing of global monetary conditions is therefore warranted,” the Fed said. “Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.”
The Fed Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1.75%.