Federal Reserve cuts interest rate by 50 basis points to 3%

The Federal Open Market Committee lowered its target for the federal funds rate by 50 basis points to 3 percent Sept. 17, according to a Federal Reserve news release. The Board of Governors, in a related action, approved a reduction of 50 basis points for the discount rate, making it 2.5 percent.

Until normal market function is re-stored, the Federal Reserve will continue to supply "unusually large volumes of liquidity to the financial markets," the release stated. The FOMC recognizes that as a consequence, the actual federal funds rate may occasionally be below its target during these unusual circumstances brought on by the attacks on the World Trade Center and the Pentagon.

The release stated that prior to the attacks, employment, production and business spending remained weak, and the events of Sept. 11 have the potential to further dampen spending. However, the long-term prospects for productivity, growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate.

The release further stated that, "For the foreseeable future, the committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness."