October 29, 2008 / 6:24 PM / 9 years ago

Fed cuts key rate by half point to 1 percent

WASHINGTON (Reuters) - The U.S. Federal Reserve cut a key interest rate by a hefty half-percentage point on Wednesday to prevent a widening credit crisis from tipping the United States into a deep and prolonged recession.

<p>A policeman walks around the Federal Reserve Building in Washington October 29, 2008. The Fed is expected to lower the prime rate on Wednesday after two days of meetings. REUTERS/Larry Downing</p>

The Fed’s decision takes its target for overnight bank lending to 1 percent, the lowest since June 2004. Wall Street was united in the opinion the Fed would lower rates, although views were split on the likely size of the move.

The U.S. central bank has cut benchmark overnight rates from 5.25 percent in nine steps over the past 13 months to counter a financial storm that started with the collapse of the U.S. mortgage market and spread around the world.

Reporting by Mark Felsenthal and David Lawder

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