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The Fed’s current rate cut addressed the risk of recession and a meltdown in credit markets. But by lowering rates before it really wanted to , it revised fears of inflation - some observers have warned that inflation could force the central bank to raise rates at some point in the future

The central bank cut the target overnight lending rate to 3.5 percent from 4.25 percent, the Federal Open Market Committee said in a statement in Washington. Policy makers weren’t scheduled to gather until next week. It’s the biggest single reduction since the Fed began using the rate as the principal tool of monetary policy around 1990.

“Broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households,” the Fed said in a statement in Washington. The FOMC took the action “in view of a weakening of the economic outlook and increasing downside risks to growth.”

Policy makers set aside concerns about inflation to lower borrowing costs for the fourth time since September after retail sales fell, the unemployment rate climbed and global stocks slumped. Chairman Ben S. Bernanke shifted the Fed’s stance to a more aggressive approach in remarks this month citing a need for “decisive and timely” action.