WASHINGTON - The Federal Reserve pumped $41 billion into the U.S. financial system Thursday, the largest cash infusion since September 2001, to help companies get through a credit crunch.
The action comes one day after Fed Chairman Ben Bernanke and all but one of his central bank colleagues voted to slice a key interest rate for the second time in six weeks to protect the economy from the ill effects of collapse in the housing market, aggravated by the credit troubles.
The cash injection also came as Wall Street took a nosedive Thursday. The Dow Jones industrials were down more than 260 points in afternoon trading.
The Fed on Wednesday ordered its key rate, called the federal funds rate, to be lowered by one-quarter percentage point to 4.50 percent. That followed up on a bolder, half-percentage point cut in September. Those two rate reductions might be sufficient to help the economy make its way safely through trouble spots, Fed policymakers indicated.
The funds rate affects many other interest rates charged to millions of individuals and businesses and is the Fed's most potent tool for influencing economic activity.
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