The Federal Reserve dropped its most important interest rate to a nearly two-year low on Tuesday and left the door open to additional cuts to prevent a housing and credit meltdown from pushing the economy into a recession.

Fed Chairman Ben Bernanke and all but one of his colleagues agreed to trim the federal funds rate by one-quarter percentage point to 4.25 percent.

The rate reduction, the third this year, was needed to energize national economic growth, Fed officials said. The deepening housing slump is affecting the behavior of consumers and businesses alike, the Fed said.