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Wednesday, December 17, 2008

Fed sets target range for funds rate of 0 to 0.25%

The Federal Reserve cut the federal funds rate by three quarters of one percent to 0.25% but added that it will let the rate float down to zero. By setting the new target range, the Fed signaled it has exhausted the funds rate as a tool for monetary policy. The target range will also be useful because the funds rate would likely have traded below any target at such a low level. Economists stressed the central bank still has ammunition to counter the recession by "using the power of the printing press" to add money to its balance sheet.

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