NEW YORK (CNNMoney.com) — Faced with growing risks of recession, the Federal Reserve made its second deep interest-rate cut in a week and slashed a key short-term rate by a half-percentage point Wednesday.

U.S. stocks, which had been slightly lower ahead of the announcement, surged on news of the rate cut but ended lower after a volatile final two hours of trading.

The federal funds rate – an overnight bank lending rate that affects how much interest consumers pay on credit cards, home equity lines of credit and auto loans – was cut to 3.0% from 3.5%. The rate had stood at 5.25% only four months ago.

Fed slashes rates to 3.5%

Citing weakening economic outlook, Federal Reserve makes biggest cut in nearly 24 years – three quarters of a point.

January 22 2008: 9:11 AM EST

NEW YORK (CNNMoney.com) — The Federal Reserve slashed two key interest rates by three-quarters of a percentage point Tuesday following an unscheduled meeting, citing continued concerns about a weakening economy and turmoil in the financial markets.

The Fed lowered its federal funds rate, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans, from 4.25 percent to 3.5 percent. The Fed also lowered its discount rate, which is what it costs banks to borrow directly from the central bank, by three-quarters of a point, to 4 percent.

This was the biggest rate cut by the Fed since October 1984.

“Broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets,” the Fed said in a statement.

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