Fed Takes Action to Cut Short-Term Interest Rate: Move Is Tactic to ...
The Federal Reserve acted yesterday to give the slowing U.S. economy a boost by lowering a key short-term interest rate by about one-quarter of a percentage point, financial analysts said.</br></br>The move should ensure that a wide range of financing charges paid by consumers and businesses also will move down shortly. The prime lending rate at commercial banks, to which most business lending and a growing share of consumer loans are tied, should fall from 10.5 percent to 10 percent, the analysts said.</br></br>The nationÛªs central bank presumably moved yesterday in response to signs that the U.S. economy, after growing fairly strongly through the third quarter, has cooled off.</br></br>The Commerce Department said ÐÊyesterday that the gross national product grew at a 3 percent annual rate in the third quarter rather than the 2.7 percent rate reported earlier. Those rates are adjusted for inflation, which ran at a 2.9 percent pace for the quarter.</br></br>But many forecasters now think growth this quarter will turn out to be at a 1 percent rate or even less. They also believe the first half of 1990 will be sluggish. The Bush administration has predicted 2.6 percent growth for 1990, higher than most private analysts.