FEDERAL RESERVE MAKES FIFTH INTEREST RATES CUT

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(May 15, 2001) -- As expected, the Federal Reserve Board made its fifth rate cut of the year today, in a continuing attempt to perk up the sagging U.S. economy.

The Federal Open Markets Committee lowered interest rates by 0.5% at its regular meeting, after four previous 0.5% cuts failed to spark a recovery.

"Consumption and housing expenditures have held up reasonably well, though activity in these areas has flattened recently. ... With pressures on labor and product markets easing, inflation is expected to remain contained," said the committee's statement. But it added that "the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future."

The stock market, which had already factored in the expected rate cut, was unaffected after a morning of light trading. The Dow Jones Industrial was trading at 10,911.10 and had only gained 33.80 points by 3 p.m., an increase of 0.31% Ad and media agency stocks were also unfazed and remained flat by 3p.m.

Analysts had feared the Fed would cut less than 0.5% this time, after signs that the economy is stabilizing. But rising unemployment rates and dropping consumer confidence numbers in April spurred the latest cut. -- Mercedes Cardona

Copyright May 2001, Crain Communications Inc.

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