WASHINGTON, Aug. 17 (UPI) -- The U.S. Federal Reserve announced Friday it had approved a one-half percentage point cut in its discount rate on loans to banks.
The more closely watched fed-funds rate remained unchanged.
In its statement, the Fed said that increased economic uncertainty poses risks for U.S. business growth, The Wall Street Journal said. Major problems behind the move include the seriously slumping housing market and drying up of credit.
The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent from 6.25 percent.
The Fed didn't change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year though it has been infusing billions of dollars into the banking system to keep that rate stable.
Many economists said they believe these problems, including declining consumer confidence, could lead to a recession.
