Some analysts said that if the Fed was not done lowering rates, it might at least slow down, partly to conserve ammunition lest conditions worsen and partly because of a spate of fiscal stimulus measures likely to come on-stream soon.
"I think the fed funds rate is going to go lower in December, another 25 basis points. Thereafter, the Fed is going to be much more cautious," said Eric Green, senior economist at BNP Paribas Corp in New York.
Jobs disappearing fast
The latest cut comes against an increasingly grim backdrop of rising unemployment and eroding consumer confidence. In the third quarter, the US logged its sharpest quarterly contraction in national economic activity since the last recession in 1990 and 1991.
In its statement, the Fed said it still saw weakness, rather than price pressures, as the main threat to the US economy -- a sign it was ready to cut rates further should gross domestic product continue to shrink, as most private forecasters expect it will into early next year.
The economy already was slowing before hijacked aircraft flattened the World Trade Center and damaged the Pentagon, halting much of national commerce for days and inflicting lasting scars on airlines and other sectors.
Last week, the Commerce Department confirmed GDP contracted at a 0.4 percent rate in the third quarter. During October, 415,000 jobs were scrubbed from payrolls, the most in two decades, as the combined impact of the attacks and anthrax fears hampered activity throughout the economy.
Most economists foresee GDP shrinking again this quarter and many think this will continue in the first quarter of next year, easily meeting the definition of a recession in which national output falls for six months or more.
Coupled with the Fed's monetary easing, the government has added fiscal stimulus of about US$55 billion in emergency spending and industry aid since the attacks and is weighing another tax-cut and spending program worth as much as US$100 billion which, if passed by Congress, will kick in next year.
However, some in the corporate world said rate cuts were not the best tonic for falling corporate spending.
"Certainly it's better than nothing, but interest rate cuts are not the solution to getting the economy going. It's consumer confidence, pure and simple," said John Correnti, chief executive of Birmingham Steel. "If you're in industry or in manufacturing, you're not going to put a new factory in just because interest rates are low."
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