US Central Bank Says Economy Weakens Further

U.S. central bank officials say the economy has weakened further, so they must find more ways to restart the stalled credit market and get the economy moving again.

The Federal Reserve said Wednesday that it would use "all available tools" to bolster troubled banks so they can resume lending, making it possible for business to buy the equipment they need to expand and hire people.

Fed officials say emergency programs to make more lending money available have brought some improvements, but markets are still stressed.

Usually the Fed tries to stimulate the economy by reducing interest rates, but they have already cut the benchmark rate to a record low level of 0.25 percent leaving no room for further cuts.  Officials say they are likely to keep interest rates low for some time.  

Earlier, the International Monetary Fund said the U.S. economy is shrinking faster than had been thought, and will contract by 1.6 percent this year.

Many economists say the U.S. economy probably shrank at a five percent annual rate during the last three months of 2008.  We will learn if the predictions are correct on Friday, when government experts publish the GDP (gross domestic product) figures for the last quarter of 2008.

Some information for this report was provided by AFP, AP and Reuters.

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