Continuing its course of easing, the
Federal Open Market Committee lowered the
fed funds target rate by a half point to 2%. It was the Fed's 10th rate cut this year.
Most forecasters expected a half-point cut, but a significant minority -- nine of the 24 economists at banks that deal directly with
-- had forecast the central bank would drop the target rate by just a quarter point.
The FOMC's decision to cut rates by the more aggressive half point was probably prompted by the recent spate of bad economic news capped by last Friday's jobs report. The U.S. lost 415,000 jobs in October and the unemployment rate skipped a half-percentage point higher to 5.4%.
In an indication that more cutting is likely, the FOMC said in the statement it released after the meeting that "the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future." A growing number of Wall Street economists expect the target rate to eventually fall to 1.5% and one -- Credit Suisse First Boston's Neal Soss -- thinks it will slip to 1%.
In a related action, the Fed cut the discount rate -- the rate at which banks can borrow from the Fed's discount window -- to 1.5% from 2%.