Bernanke cuts rates to protect financial system

WASHINGTON, Jan 30, 2008 (AFP) – The US Federal Reserve has stepped up its campaign to head off recession with another half-point rate cut as part of an aggressive move to avert a downward economic spiral, analysts say. The cut Wednesday in the federal funds rate to 3.0 percent came just eight days after an emergency cut of 0.75 percentage points in the face of a global stock market rout and concerns the world’s biggest economy was sinking fast.

Analysts say the Fed headed by Ben Bernanke is acting more aggressively than any time in the past two decades.

“We must go back to early 1985 to find a period when rates fell more sharply in such a short period of time,” said Robert Brusca at FAO Economics.

Brusca said Fed members have an “amorphous fear of recession snowballing and getting out of hand.”

Although the US has survived recessions before, Brusca said some see a more troublesome scenario.

“Having seen what happened to Japan with its property market ills, the Fed decided not to risk that a weak housing market topped by a recession added to a weakened financial sector that could turn into an economic disaster,” Brusca said.

The cuts in the federal funds rate, used for overnight interbank