Fed: Contraction to Continue Despite Moves

By Jeannine Aversa

WASHINGTON -- Even as Federal Reserve officials slashed their key interest rate to a record low and pledged to use other unconventional tools to fight the worst financial crisis since the 1930s, they still feared the economy would be stuck in a painful rut for some time.

Documents released Tuesday provided insights into the Fed's historic decision to ratchet down its rate from 1% to near zero at its Dec. 15-16 meeting. In the first action of its kind in the Fed's 95-year history, Fed Chairman Ben Bernanke and his colleagues created a target range for its rate, putting it at zero to 0.25%.

Despite the aggressive action, "the economic outlook would remain weak for a time and the downside risks to economic activity would be substantial," according to the Fed document. ...