WASHINGTON -- The ailing economy may have gotten its last dose of bracing tonic for a while. The Federal Reserve is hoping it won't have to refill the prescription.
The Fed cut interest rates to the lowest point in nearly four years Wednesday as the nation teetered on the edge of recession. In fact, the Fed's trim was smaller than those of recent months amid indications the central bank might pause to see whether months of powerful rate cuts and billions of dollars in stimulus checks will be enough to lift the country out of its slump.
Chairman Ben Bernanke led a divided Fed, in an 8-2 vote, in slicing its key rate by one-quarter percentage point to 2 percent.
In turn, the prime lending rate for millions of consumers and businesses fell by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates are the lowest since late 2004.
The Federal Reserve, which has been dropping rates since September, turned much more forceful early this year when housing, credit and financial problems worsened. Rate reductions in January and March marked the most aggressive intervention in a quarter-century.
"The substantial easing of monetary policy to date ... should help to promote moderate growth over time and to mitigate risks to economic activity," the Fed said, strongly hinting that more cuts may not be needed.
Wall Street rallied at first but then pulled back, concerned that the reduction might be the last for a while. Investors initially drove the Dow Jones industrial average up more than 178 points -- lifting it to higher than 13,000 for the first time since early January. Then traders' caution returned, and the index ended the day down 11.81 points.
Although the Fed didn't take the prospect of another reduction off the table, a growing number of economists believe the central bank is winding down its rate-cutting campaign. Barring another hit to economic growth, they believe rates probably will stay where they are, perhaps through the rest of this year, in part because the Fed is concerned that further cuts could join with galloping energy and food prices and spread inflation dangerously higher.
By all accounts, the country's economic health is fragile.
The economy crawled ahead at a pace of only 0.6 percent from January through March as housing and credit problems forced people and businesses to hunker down, the Commerce Department reported hours before the Fed's action. Growth was just as feeble in the prior quarter.
Job losses for the first three months of the year neared the staggering quarter-million mark, and a government report Friday is expected to show that employers shed jobs again in April. The unemployment rate, at 5.1 percent, also could creep higher in April and hit 6 percent early next year, analysts say.
Two Fed members -- Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas -- opposed cutting rates Wednesday.
Both men have a reputation for being especially vigilant about fighting inflation.