The Federal Reserve cut its key lending rate today by 25 basis points, to 4.5%. The expected reduction is the second of the federal funds rate in two months. The board asserted, however, that growth and inflation risks are now “roughly balanced,” a signal that further cuts shouldn’t be taken for granted. The discount rate was also cut by a quarter-point, to 5%.
A Fed statement said the cuts “should help forestall” a mortgage-induced meltdown. The Board of Governors was in what the Wall Street Journal calls an “awkward position,” as the economy’s strong third-quarter performance made a cut potentially ominous for inflation concerns. But Fed chairman Ben Bernanke’s real concerns lie in coming quarters; the board voted 9-1 to grease lending wheels.