WASHINGTON, March 7, 2008 (AFP) – The US Federal Reserve on Friday announced moves to pump 200 billion dollars into the financial system to try to contain contagion from a housing-related credit crunch that is pummeling the economy. “And there is a real possibility, given the escalating turmoil in credit markets, that the cut will be bigger or will come sooner,” Gault said, predicting rates ultimately would drop at least to 2.0 percent.
The central bank said it had coordinated closely with foreign central banks to take temporary action “to address heightened liquidity pressures in term funding markets.”
The announcement came just minutes before the Labor Department reported the economy lost 63,000 nonfarm jobs in February. It was the second consecutive month of job losses and triggered alarms that the world’s largest economy, which depends on consumer spending, could be heading toward recession.
The Fed mounted a two-pronged offensive to combat the spreading credit seizure as the economy struggles with rising mortgage defaults and spiking foreclosures in the worst housing slump in decades.
The central bank hiked the amounts available this month in its Term Auction Facility to a combined 100 billion dollars. The pro