The central bank reduced its benchmark interest rate by half a point to 3 percent yesterday, eight days after an emergency three-quarter point move, the fastest easing of monetary policy since 1990.The Fed left the door open to more cuts by saying in its statement that "downside risks to growth remain."
The decisions alleviated some of the criticism investors and economists have directed at the Fed since August, when it was still saying inflation was the major risk.
Traders increased bets on another half-point reduction after reports showed consumer spending rose at the slowest pace in six months in December and initial claims for unemployment insurance jumped last week.
Last year, Bernanke opted to tackle a surge in banks' funding costs by lowering the rate on direct loans to banks and introducing a tool to auction funds to lenders, instead of more aggressive cuts in the benchmark rate.
Now, he is using the federal funds rate to address broader, deeper declines in stocks and housing, aiming to avoid the first recession since 2001.
At the same time, Bernanke may have earned himself fresh criticism from some economists who claim he has gone soft on inflation and risks unleashing new asset booms and busts.
