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Fed cuts interest rate to 2 percent

The US central bank hints at a pause after Wednesday's quarter-point trim.

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After months of coordinated efforts to stimulate a faltering economy, the Federal Reserve is finally poised to sit on the sidelines for a while.

America's central bank cut its key interest rate Wednesday , bringing it down by a quarter point to 2 percent. But the big news was in the accompanying statement in which the Fed's policymaking committee sounded less anxious about economic conditions.

This doesn't mean that the risk of recession is ending. The challenges to growth – from slow job creation to defaulting mortgage loans and declining home prices – are still significant.

Consumers also remain worried about inflation, given the reminders they see in prices at gas stations and grocery aisles.

The Federal Reserve also sees these risks. Yet policymakers appear marginally less worried than they were in March. Economists say the Fed has opened the door to a strategic pause.

"They want to wait and assess the impact of all the actions that they've taken," says Asha Bangalore, an economist at the Northern Trust Co. in Chicago. "I would say they won't do anything [on interest rates] until the end of the year."

At its scheduled policy meeting in Washington this week, the Fed announced its seventh recent move to lower interest rates for overnight bank loans. The new target of 2 percent compares with 2.25 percent in March and a recent peak of 5.25 percent last September.


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