The Federal Open Market Committee decided today to lowerkeep its target for the federal funds rate 50 basis points to 1at 2 percent.

The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures. Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit.

In light of Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.

Inflation has been high, spurred by the declinesearlier increases in the prices of energy and some other commodities and the weaker prospects for economic activity, the. The Committee expects inflation to moderate in coming quarters to levels consistent with price stability.later this year and next year, but the inflation outlook remains highly uncertain.

Recent policy actions, including today?s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain.The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman;Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Ms. Cumming voted as the alternate for Timothy F. Geithner.

The Upshot:

• They have finally concluded that the real economy is in trouble, and not just the financial economy.
• They think inflation will move to stable levels (and perhaps they fear deflation — they have moved from a position of rhetorical uncertainty to certainty).? They no longer fear inflation.
• They hope that all they have done so far will work.

My interpretations all, but this statement changed a lot from the last one.