INSTANT VIEW: Federal Reserve cuts key rate 1/4 point

NEW YORK (Reuters) - The Federal Reserve lowered a key U.S. interest rate by a modest quarter percentage point on Wednesday in what may be the last of a series of cuts aimed at aiding an economy hit hard by a housing slump and credit market turmoil.

KEY POINTS: * The Fed's action takes the bellwether federal funds rate to 2 percent, the lowest since December 2004. * It was the seventh reduction in a campaign that has brought rates down by 3.25 percentage points since mid-September. * Fed says uncertainty about inflation outlook remains high. * Fed says readings on core inflation somewhat improved, but energy, commodity prices up. * Fed says expects inflation to moderate in coming quarters

COMMENTS:

MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL

MARKETS, TORONTO:

"The decision and the statement were very much as expected and they have moved more into data watch mode with incoming data determining policy going forward. If anything, limited impact on the dollar."

MARKET REACTION: * BONDS: U.S. Treasury debt prices lower. * CURRENCIES: U.S. dollar rebounds against the yen. * STOCKS: U.S. stock indexes add to gains after brief pull-back. * RATE FUTURES: U.S. short-term interest rate futures rise.

EARLIER DATA FROM APRIL 30: * Business activity in the U.S. Midwest contracted in April for a third straight month but was slightly less weak than expected, a report showed on Wednesday.

* The U.S. economy grew at a slightly stronger pace than forecast as 2008 began, helped by inventory-building that tempered a steadily deteriorating housing sector and less vigorous consumer spending. * U.S. private-sector employers unexpectedly added 10,000 jobs in April according to a private report by ADP Employer Services released on Wednesday. * MBA weekly mortgage market index