The U.S. Federal Reserve decided on Wednesday to cut a key interest rate by one quarter percentage point to 2.0 percent to prevent the economy from slipping into recession.
Traders in the Eurodollar options pit of the Chicago Mercantile Exchange in Chicago, Illinois signal orders shortly after the Federal Open Market Committee lowered short-term interest rates March 18, 2008.
The Wednesday action, the seventh straight move since Sept. 18, 2007, could be the last one for a while as soaring energy and food prices heighten inflation concerns, according to analysts.
As a result of the Fed actions in the past seven months, the federal funds rate, which commercial banks charge each other on overnight loans, have been cut by a combined 3.25 percentage points.
The quarter-point rate cut would trigger a similar reduction in banks' prime lending rate, the benchmark for millions of consumer and business loans. That means borrowing costs for consumers and businesses would be lowered to 5 percent from 5.25 percent.
The Fed action came hours after a government report showed that the U.S. economy grew at an annual rate of 0.6 percent in the first three months of this year, the same pace as in the previous quarter but slightly stronger than the 0.2 percent growth rate forecast by analysts.
A customer pumps gas at a Shell gas station in Cambridge, Massachusetts April 29, 2008.
