Fed cuts key interest rate by half point

The US Federal Reserve cuts a key interest rate for the second time in nine days to halt the economic slowdown.

The Federal Reserve cut a key interest rate by a half-percentage point on Wednesday as part of an aggressive effort to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch.

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The Fed's action takes the bellwether federal funds rate target to 3 per cent, the lowest since June 2005, and comes just eight days after it slashed rates by a bold three-quarters of a point. Wednesday's follow-up reduction was in line with the expectations of many financial market participants.

The cumulative 1.25 percentage point reduction in the benchmark overnight rate in less than two weeks ranks among the most abrupt rate-cutting sprees in the modern history of the US central bank.