Fed surprises with half-point rate cut

The Federal Reserve Tuesday surprised financial markets with an aggressive half-point cut in a key lending rate, lowering borrowing costs for businesses and consumers in response to a housing downturn that threatens to spread to the broader economy.

'Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time,' the Fed said in a statement. The central bank cautioned that 'the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally.'