The discount rate is the interest that the Fed charges to make direct loans to banks. The economy grew at an annual rate of just 1 percent in the final three months of 2000, the weakest performance in more than five years. Many economists believe the economy continued to lose altitude in the recently ended first quarter. Some analysts project that economic growth stalled during the January-March quarter and others say it may actually have slipped into reverse. Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, welcomed the Fed's latest rate cut.
Aggressive action is needed to keep the economy above water.
President Bush and Congress are working on ways to speed up tax relief to help give a lift to the economy. The Fed's next scheduled meeting is May 15. In the part of Wednesday's statement that reflects possible future action, the central bank maintained its position that the biggest threat to the economy is recession, not inflation. The Fed said its action followed a review of the economy's prospects in light of data that became available since its last meeting March 20. All Rights Reserved.