WASHINGTON – Federal Reserve System policymakers today voted to cut two key interest rates, its benchmark federal funds rate and the discount rate, each by 75 basis points.

The move comes two days after the Fed Board, in a rare emergency move, pared the discount rate by 25 basis points, expanded non-bank lending and agreed to finance the “less-liquid assets” of the ailing Bear Stearns Cos. Inc. (READ MORE)

“Recent information indicates that the outlook for economic activity has weakened further,” the Federal Open Market Committee said in its announcement. “Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.”

But, it added, “Inflation has been elevated, and some indicators of inflation expectations have risen, [although] the committee expects inflation to moderate in coming quarters.”

The FOMC concluded its regular meeting today by cutting the benchmark federal funds rate to 2.25 percent from the previous 3.00 percent. The rate – used for overnight loans between banks – had started the year at 3.50 percent.

It cut the discount rate today to 2.50 percent, just 25 basis points above the funds rate. That rate – used for direct loans from the central bank – started the year at 4.50 percent. It was trimmed by 75 basis points in a Jan. 22 emergency action, 50 basis points at the FOMC’s regular meeting Jan. 30 and 75 basis points in this weekend’s emergency action.

Since mid-August, the Fed has pared the funds rate six times and the discount rate eight times, as it has struggled to stabilize an economy reeling from the subprime credit collapse. As of March 14, financial services companies have posted at least $195 billion in writedowns and credit losses related to the U.S. mortgage markets, Bloomberg News said.

“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 FOMC wrote. “However, downside risks to growth remain. The committee will act in a timely manner as needed to promote sustainable economic growth and price stability.”

The panel split, with seven members joining Chairman Ben S. Bernanke in supporting the monetary policy. The two dissenters, Dallas Fed President Richard W. Fisher and Philadelphia Fed President Charles I. Plosser, both said they preferred less aggressive action.

But analysts had expected an even sharper cut, according to Econoday, which reported a consensus estimate of 2.00 percent for the federal funds rate. “Tightening financial conditions have weakened the growth outlook, and that alone justifies aggressive policy action,” Brian Sack, senior economist at Macroeconomic Advisers LLC in Washington, D.C., and a former Fed economist, told Bloomberg News. The rate action also should help offset “risks coming from financial market stress,” he said.

Additional information about the Federal Reserve System, including past monetary policy statements issued by the Federal Open Market Committee, can be found at www.federalreserve.gov.