Fed Cuts Main Rate to 2.25%, Says Outlook `Weakened' (Craig Torres)

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March 18 (Bloomberg) -- The Federal Reserve cut its main lending rate by three quarters of a percentage point to 2.25 percent as officials try to prop up the faltering economy and restore faith in the U.S. financial system.

``Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity,'' the Federal Open Market Committee said in a statement after meeting today in Washington.

Chairman Ben S. Bernanke is struggling to cushion consumers and companies from the worst of the credit freeze that's made some of the world's biggest banks reluctant to lend to each other. Officials also showed renewed concern about inflation, making a smaller reduction than traders anticipated. Two policy makers dissented in favor of ``less aggressive action.''

``Recent information indicates that the outlook for economic activity has weakened further,'' the Fed said. Still, ``inflation has been elevated, and some indicators of inflation expectations have risen,'' the Fed added.

The Fed Board of Governors also voted to lower the discount rate, the cost of direct loans from the central bank, to 2.5 percent.