California Business Minute™

Hi, I am Tim Johnson and welcome to the California Business Minute.

The Federal Reserve cut the federal funds rate by three-quarters of a percentage point (0.75),
the largest reduction in over two decades, placing the rate at 3.5 percent.  This is the first such
cut made between regularly scheduled meetings since just after September 11, 2001.  The action
is also the single largest rate reduction since October 1984.

Wall Street analysts believe the decision was made due to the speed of the weakening economy
and increasing tightening of credit markets.

In a statement by the Federal Reserve’s Open Market Committee, it was identified that the
Committee took this action in view of a weakening of the economic outlook and increasing downside
risks to growth. While strains in short term funding markets have eased somewhat broader financial
market conditions have continued to deteriorate and credit has tighten further for some business and
households.  In addition the statement identified that incoming information indicates a deepening of
the housing contraction as well as some softening in labor markets.  Fed officials also indicated
concern about a possible recession by illustrating that appreciable downside to growth remains.

I am Tim Johnson and this has been the California Business Minute