Federal Reserve cuts key rates

WASHINGTON, March 18 (UPI) -- The U.S. Federal Reserve cut the federal funds rate to 2 1/4 percent Tuesday in a bid to bolster confidence on Wall Street.

The action widens the gap between what banks pay for loans when borrowing from each other and what they earn from their customers, helping restore liquidity to troubled financial firms.

"Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened.," the Fed said in a statement.

"Inflation has been elevated, and some indicators of inflation expectations have risen," the statement said.

Eight members of the Federal Open Markets Committee, including Chairman Ben Bernanke, approved the rate cute, the bank said. William Poole of the Federal Reserve Bank of St. Louis was the only committee member opposed to the move.

In a second, related action, the Fed also decreased the discount rate, cutting it to 2 1/2 percent.