The Federal Reserve System agreed Wednesday to reduce the federal funds rate 25 basis points to 4.5-percent, while also agreeing to a 25-basis-point cut in the discount rate, taking it to 5-percent.
In a statement released on the action, the Federal Reserve said the cuts were made to offset forecasts of a slowing economy, partly caused by the recent housing correction.
“Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time,” the Fed said.
When it comes to the issue of inflation, the Federal Reserve concluded that while core inflation readings have improved slightly, the Board will continue to monitor the effects “energy and commodity prices” could potentially have on inflation in the future.