INSTANT VIEW: Fed cuts fed funds rate to zero-0.25 pct

NEW YORK (Reuters) - The U.S. Federal Reserve on Tuesday cut its target for overnight interest rates to zero to 0.25 percent, bringing it closer to unconventional action to lift the economy out of a year-long recession.

KEY POINTS OF STATEMENT: * The Federal Open Market Committee decided to establish a target range for the federal funds rate of 0 to 1/4 percent. * Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. * Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further. * Meanwhile, inflationary pressures have diminished appreciably and are expected to moderate further in coming quarters. * The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability and expects exceptionally low levels of the federal funds rate for some time. * As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. * The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.

COMMENTS:

CRAIG PECKHAM, EQUITY TRADING STRATEGIST, JEFFERIES & COMPANY, NEW YORK:

"The forceful language to really use its balance sheet rather aggressively to inject liquidity in the market is tantamount to quantitative easing. The Fed is pulling another arrow out of its quiver.

"Stocks like the fact that the Fed is moving forcefully to really inject more liquidity here in the economy and stimulate growth."

BRUCE MCCAIN, CHIEF INVESTMENT STRATEGIST, KEY PRIVATE BANK, CLEVELAND, OHIO:

"I think what the Fed has said basically here is that interest rates are no longer relevant: we will set it essentially at zero and from here on out we will purchase whatever securities we think are needed to get the credit markets going again and get the economy going again."

"The Treasury market has been taken a little bit by surprise."

"I think the (market) fears of deflation are probably overstated, because ultimately the quantitative easing has major inflationary potential."

JOCELYNN DRAKE, MARKET ANALYST, SCHAEFFER'S INVESTMENT RESEARCH, CINCINNATI, OHIO:

"The rate cut was definitely more than a lot of people were expecting and that's really helping the market here, but the big take away here is Bernanke's going back out into the market and trying to loosen things up in the credit arena.

We've got a Fed that's willing to really go the distance for the market right now."

JESSICA HOVERSEN, FIXED INCOME MARKET ANALYST, MF GLOBAL RESEARCH, CHICAGO:

"They brought the down the target to where the effective rate has been trading. They are looking at buying longer Treasuries to bring down mortgage rates.

"The Fed has realized that there is one entity left to bring the financial system in line. It has to be the Atlas of the world to bear the weight of the financial system on its shoulder.