More cuts: And the Fed is still widely expected to aggressively cut rates again at its Jan. 30 meeting. According to futures listed on the Chicago Board of Trade, investors are pricing in an 66 percent chance that the Fed cut another half-point.

“This was a big step but there is still more to go,” said Keith Hembre, chief economist with First American Funds. Hembre thinks that the Fed will cut the fed funds rate to at least 2.5 percent within the next few months.

Fed lending has helped: The Fed has also loaned $70 billion to banks through a series of three auctions since December to help mitigate the effects of the credit crunch on Wall Street. That appears to be working as the Fed said Tuesday that “strains in short-term funding markets have eased somewhat.”

Government “stimulus” plan: President Bush and Congress are also working on an economic stimulus package to help beleaguered consumers. The plan is widely expected to include payments to consumers, and tax breaks to spur investments by businesses.