Fed Cuts Funds Rate Three-Quarter Point to 2.25%

The Federal Open Market Committee voted 8-2 to cut the fed funds rate from 3% to 2.25%, its lowest level since December 2004, and signaled more reductions are likely, unloading heavy artillery in its effort to keep the credit crunch from triggering a prolonged recession. The rate cut, though extremely aggressive by any historical measure, was likely to disappoint many on Wall Street who thought a full percentage point was needed.

The Fed's statement said: "Recent information indicates that the outlook for economic activity has weakened further. Financial markets remain under considerable stress, and the tightening of the credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters."