Updated from 2:15 p.m. EST

The

Federal Open Market Committee lowered the

fed funds target rate by 25 basis points to 1.75%, continuing its yearlong easing campaign and cutting rates for the 11th time in 2001.

At the beginning of the year, the fed funds target rate stood at 6.5%.

Tuesday's rate reduction was widely expected. The FOMC said in the statement it released after the meeting that economic activity remains soft, with underlying inflation likely to edge lower from relatively modest levels.

"To be sure, weakness in demand shows signs of abating, but those signs are preliminary and tentative," the statement said. "The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future."

The statement also said that "although the necessary reallocation of resources to enhance security may restrain advances in productivity for a time, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate."

With the National Bureau of Economic Research declaring the U.S.

in a recession, the shouting about whether the economy is poised to recover has grown louder in recent weeks. The bulls have been drawing their arguments from data showing that things aren't getting any worse, such as last week's

better than expected report from the National Association of Purchasing Management and a group of tech bellwethers, like

Intel

(INTC) - Get Report

, affirming or raising

their guidance.

Those who think the economy isn't ready to turn around also have plenty of evidence, including the Labor Department's monthly

jobs report, which revealed that 331,000 workers were

put on the street in November as the unemployment rate rose to 5.7%.

In a related action, the Fed cut the discount rate -- the rate at which banks can borrow from the Fed's discount window -- to 1.25% from 1.5%.