Fed Cuts Rate to 1% to Avert Prolonged Recession (Update3) - Bloomberg

By Craig Torres Oct. 29 (Bloomberg) -- The Federal Reserve cut its benchmarkinterest rate by half a percentage point to 1 percent, matching ahalf-century low, in an effort to avert the worst U.S. economicdownturn in the postwar era.

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``Downside risks to growth remain,'' the Federal Open MarketCommittee said today in a statement in Washington. ``Recentpolicy actions, including today's rate reduction, coordinatedinterest-rate cuts by central banks, extraordinary liquiditymeasures, and official steps to strengthen financial systems,should help over time to improve credit conditions and promote areturn to moderate economic growth.'' Central bankers worldwide are trying to revive credit andstop a self-reinforcing downturn in consumer spending and banklending from triggering a global recession. Today's decisionfollows the half-point reduction the Fed coordinated with theEuropean Central Bank and four other central banks on Oct. 8.Borrowing costs were pared today in Norway and China. The U.S. economy shrank at a 0.5 percent annual rate lastquarter, the most since the 2001 recession, the CommerceDepartment's report on gross domestic product will probably showtomorrow. Economists expect the slump to persist in the fourthquarter, according to the median estimate.

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