Fed lowers key rate half a point

NEW YORK (CNNfn) -- Federal Reserve policy makers Tuesday cut interest rates a half percentage point, hoping the move will give a nudge to a U.S. economy that had dipped to its slowest pace in years.

The move was met with disappointment on Wall Street, where prices dropped in the minutes after the announcement. Many investors had hoped for a three-quarter point cut.

ALSO Wall Street retreats after cut U.S. trade gap edges up   IN-DEPTH Eyes on the Fed   MESSAGE BOARD The state of the economy

With consumer and business spending slowing, lower interest rates could eventually cut the cost of mortgages, credit card payments and car loans and turn around corporate America's weakening profit outlook.

The Fed policy makers had to deal with a new twist as they considered how big of a cut was needed, as for the first time a big drop in stock prices has coincided with a period of record stock ownership among Americans.

That had many experts arguing whether the central bank should respond to stock market losses that could hurt consumer spending and thus become a bigger-than-ever drag on the economy.

Most economists had predicted a cut of half a percentage point, while others predicted three-quarters of a point. And a few had argued that a cut of a full point was needed to dent a slowdown that began last summer and threatens to end 10 straight years of economic growth, the longest on record in the United States.

See related sites about US

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.