Fed cuts key rate to ease pain

It may be done for rest of year

November 1, 2007

ASSOCIATED PRESS

WASHINGTON -- Borrowers beware: Don't count on yet another dose of interest rate relief from the Federal Reserve this year.

The Fed sliced an important interest rate Wednesday -- its second reduction in the last six weeks -- to help the economy survive the strains of a deepening housing slump that is likely to crimp growth in coming months.

At the same time, Fed policymakers signaled that those rate reductions may be sufficient to help the economy get through its trouble spots.

When the Fed meets in December, economists said the odds are now much higher that the Fed will leave rates alone. "They are more likely to hold rates, rather than cut them," said Brian Bethune, economist at Global Insight.

Fed Chairman Ben Bernanke and all but one of his colleagues agreed to lower the federal funds rate by one-quarter percentage point to 4.5% at the end of a two-day meeting on Wednesday.

"The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction," the Fed acknowledged in a statement explaining its action.

The funds rate affects many other interest rates charged to millions of individuals and businesses and is the Fed's most potent tool for influencing economic activity.

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