The Federal Reserve cut its benchmark interest rate by a quarter point on Wednesday, hoping to forestall what policy makers see as further slowing of the economy in the near term due in part to the U.S. housing downturn.

In an 8 to 1 vote, money policy makers of the Federal Open Market Committee cut the key federal funds rate by 25 basis points to 4.5 percent on Tuesday in a bid to forestall damage to the broader economy from turmoil in financial markets.

The Fed added that strains in financial markets had eased somewhat in the third quarter but still saw possible slowing ahead.

Today's action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time, the committee said in a statement.

The Fed noted that inflation has been modest during the year, but that higher energy and commodity prices could renew inflation pressure, adding that some inflation risks remain.

The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth, it said.

The FOMC cut the Fed funds rate on September 18 by half a percentage point, it's first cut on over four years as financial and housing markets suffered from credit tightening stemming from growing delinquencies and foreclosures in the housing market.

The Fed added that it will act as needed to keep prices stable and foster economic growth.

Voting for the rate cut were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh.

Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at the meeting.

The board also voted to lower its discount rate by a quarter point to 5 percent.