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Fed Makes Another Rate Cut to Boost Economy

For the second time in two months, the Federal Reserve cut key interest rates Wednesday. A financial analyst describes what the Fed's decision may mean for the American economy.

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    Even in recent days, there have been conflicting signs about the health of the economy, and the Fed said it weighed those different considerations today.

    On the positive side: solid economic growth and calmer financial markets. On the down side: a potential slowdown in economic expansion and growing concerns about inflation.

    We parse the words and numbers now with David Wessel, economics editor of the Wall Street Journal.


  • DAVID WESSEL, Wall Street Journal:

    Thank you.


    Start on the growth area. What were they seeing that worried them?


    Well, the Fed came into this meeting today knowing that the economy was pretty strong in the third quarter. The government said today it grew at a robust 3.9 percent rate, but the housing problem is a lot worse than people anticipated.

    So housing is worse. Oil prices are higher, and that can have a depressing effect on the economy. And there are some signs that this credit crunch is beginning to bite in other parts of the economy besides mortgages.