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WASHINGTON — The Federal Reserve, pledging a “rapid and forceful” response to the economy’s dramatic slowdown, cut interest rates on Wednesday by another half percentage point. 

It was the second rate reduction this month and was viewed as a strong signal the central bank plans to move as aggressively as it can to fight the growing threat of a recession. 

The widely expected rate cut drew a far more muted response on Wall Street than the Fed’s surprise announcement of its first half-point reduction on Jan. 3. That move had triggered the biggest one-day rally in Nasdaq’s history. 

On Wednesday, the Dow Jones industrial average ended the day up just 6.16 at 10,887.36 while the Nasdaq fell by 65.46 to 2,772.89, a reaction analysts attributed to profit taking. 

The Fed said it was lowering its target for the federal funds rate, the interest that banks charge each other, to 5.5 percent. It had been at 6.5 percent at the beginning of this month, reflecting six rate increases from June 1999 to May 2000 as the central bank pushed rates higher to slow growth and combat inflation. 

The two half-point cuts marked the first time in Federal Reserve Chairman Alan Greenspan’s 13-year tenure that the central bank has reduced the funds rate by a full percentage point in a single month. 

The Fed’s action meant a further drop in borrowing costs for millions of Americans as commercial banks immediately announced reductions in their prime lending rate, the benchmark for many business and consumer loans, by one-half point to 8.5 percent. 

The Fed statement cited a long litany of economic troubles that had caused it to act. 

“Consumer and business confidence has eroded further, exacerbated by rising energy costs that continue to drain consumer purchasing power and press on business profit margins,” the Fed said in its statement. “Taken together, and with inflation contained, these circumstances have called for a rapid and forceful response of monetary policy.” 

Analysts viewed the back-to-back half point reductions and the Fed’s strong language as a clear signal more rate cuts are coming. 

“The Fed is telling us that they are going to do whatever they possibly can to keep us out of a recession,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce. 

The Fed’s action came after the government reported Wednesday that economic growth slowed to just 1.4 percent at an annual rate in the final three months of 2000, the weakest increase in the gross domestic product in more than five years. 

Greenspan had told Congress last week that growth in the current quarter could be “very close to zero.” He said whether the economy averts a full-blown recession would determined by how much worried consumers cut back on spending. 

The Conference Board on Tuesday said that its closely followed consumer confidence index fell for a fourth straight month in January, dropping by the largest amount in four years. 

Allen Sinai, chief economist at Decision Economics in New York, said factors such as how much businesses cut back on production and the impact of the California energy crisis will determine whether the GDP turns negative in the first quarter. He said he was currently forecasting a 0.5 percent growth rate. 

“For sure, we are going to have a recession-like environment. That is already here,” Sinai said. “The hope is that this aggressive easing of monetary policy will limit any downturn and shorten its length.” 

The Bush administration has used the spreading economic weakness to sell Congress on the need to act quickly on its $1.6 trillion tax cut. President Bush told reporters Tuesday that he would refrain from any further direct comments on Fed action in order to respect the central bank’s independence. He had praised the Jan. 3 move. 

In a statement, Treasury Secretary Paul O’Neill said the administration shares the Fed’s goals of “maintaining healthy economic growth while preserving low inflation.” 

Many saw the Fed’s aggressive easing as an effort by Greenspan to avoid the mistakes that brought on the 1990-91 recession, the only downturn in his tenure. The administration of Bush’s father blamed that downturn on the Fed’s slowness in responding to signs of weakness. 

“There is no question that the Fed chairman is pulling out all the stops to avoid a major blot on his otherwise shining record,” said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. 

Jones predicted the Fed likely will follow up Wednesday’s move with another half-point cut at the next meeting on March 20 or cut rates in two quarter-point moves, with one before the March meeting. 

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On the Net: 

Federal Reserve: http://www.federalreserve.gov