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The

Federal Reserve

on Wednesday lowered its closely-watched target for short-term interest rates by a quarter-point, bringing the federal funds rate target to 2%.

The move, made at the end of the regularly scheduled, two-day meeting of the rate-setting Federal Open Markets Committee, was widely expected on Wall Street and reflects continued concerns about economic growth amid a slowdown in the U.S. housing market and a persistent credit crisis on Wall Street.

The Fed also cut the discount rate by a quarter point to 2.25%.

The central bank has now lowered its federal funds rate by 325 basis points since the outbreak of the credit crisis last summer, but many expect it to

now pause the campaign

as it waits to see how it and other measures impact the economy. The Fed's actions have been the subject of intense controversy as the economy has continued to show signs of a slowdown amid rising signs of inflation, especially in food and energy prices.

The Commerce Department reported Wednesday morning that the

U.S. economy grew at a rate of 0.6%

in the first quarter. Despite a weak showing, continued growth challenged the widespread belief on Wall Street that the economy is already in recession, which has been traditionally defined by two successive quarters of negative GDP growth. The report sparked a debate among investors on the current state of the economy and the definition of a recession.

Some observers are reserving judgment on the fate of the near-term U.S. economy, as they wait for some indication of whether recent monetary and fiscal policy measures from the government will succeed in stimulating growth. In addition to the aggressive moves by the Fed on interest rates, tax rebates -- the centerpiece of the government's $168 billion stimulus package enacted in February -- are now hitting taxpayers' bank accounts and mailboxes, intended to boost consumer spending and confidence.

On Tuesday, Standard & Poor's reported that its Case-Shiller home price index of 20 cities fell by 12.7% in February vs. last year, the largest decline since its inception in 2001. Seventeen of the 20 metro areas reported record annual declines.

Also, the Conference Board said that its Consumer Confidence Index, which declined sharply in March, fell again to 62.3 in April. That's down from the revised 65.9 last month and 76.4 in February. The consumer sentiment index, tracked by the University of Michigan, has also dropped to its lowest levels in over a quarter-century after the U.S. recorded three-straight months of declines in the job market.

Meanwhile, widened credit spreads only began to narrow after the Fed-aided

JPMorgan Chase's

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purchase of a near-bankrupt

Bear Stearns

( BSC) and extended credit to Wall Street investment banks like

Goldman Sachs

(GS) - Get Goldman Sachs Group Inc. (The) Report

,

Lehman Brothers

( LEH) and

Merrill Lynch

( MER) through a series of new lending facilities under authorities the central bank had not exercised since the Great Depression.

The implicit government backing of investment banks and mortgage giants like

Fannie Mae

( FNM) and

Freddie Mac

( FRE) also was welcomed by financial markets.

The Fed's increasingly activist role during the credit crisis has elicited recent criticism from ex-central bankers Vincent Reinhart and Paul Volcker.