All members of the US Federal Reserve's policy-setting committee agreed a half-percentage point federal funds interest rate cut was necessary to shield the economy from credit disruptions and an intensifying housing slowdown, minutes of their September 18th meeting released today showed.
"In order to help forestall some of the adverse effects on the economy that might otherwise arise, all members agreed that a rate cut of 50 basis points at this meeting was the most prudent course of action," the minutes said.
Members thought sharply lowering benchmark overnight borrowing costs could help offset the effect of tighter financial economic conditions on the economy.
Without such a move, policy-makers were afraid that tightening credit conditions and the deepening housing slump that had been triggered by a spike in mortgage foreclosures would lead to "significant weakness" in business activity and hiring.
Also, the damage to financial markets as credit dried up could get worse and further chill economic activity, members of the US central bank's interest-rate setting Federal Open Market Committee thought.