The U.S. central bank Tuesday cut its key interest rate by a drastic three-quarters of one percent, in an effort to pull the world's largest economy out of a deepening recession. Top officials of the U.S. Federal Reserve pushed the benchmark rate to a record low (range of between zero and zero-point-two-five percent).
In a note explaining the action, Fed officials said key economic drivers like consumer spending, business investment and industrial production have all declined, and the economic outlook has weakened further. The rate cut is intended to cut borrowing costs and make it easier for companies to get the money needed to expand and hire new people.
The Fed pledged to employ "all available tools" to restart economic growth, and said the exceptionally low interest rates may be in place "for some time." Officials also said they will continue efforts to unfreeze the credit market by increasing the amount of money in circulation. U.S. stock markets rallied in anticipation of the rate cut and rose further after the announcement.
The rate cut follows a continuing series of disappointing economic reports. The latest shows consumer prices falling by a record amount in the United States in November, as the recession cut demand. A separate report said the number of new homes under construction in the United States fell by a record amount in November, reflecting continued problems with tight credit.