The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Eric S. Rosengren; and Kevin M. Warsh. Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.

In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis. - Released by U.S. Federal Reserve

The biggest interest rate cut by Fed since 1984.

Lending Clarity reporting on Fed rate cut expects another half a percent interest rate cut next week.

As further news of the housing contraction and a weakening job market pours in, the Fed made its biggest inter-meeting rate cut since October of 1984. It is also the first inter-meeting cut since 2001. Not sure which way mortgage rates will go today, but it’s gonna be a wild ride.

With an expectation for an additional .5 cut at next week’s Fed meeting and money seeking a safe haven, bonds could rally and push mortgage rates lower. Right now however, the yield curve is steepening with the U.S. Treasury 10 yr note yield falling only 10 basis points vs. 30 for the 2 Yr. Note.

The pre-market is in turmoil with a broad sell-off in equities. European and Asian markets are hemorrhaging on concerns about the U.S., poking massive holes in the notion that global markets have “decoupled” from the U.S. - Reports lendingclarity.com/