The Federal Reserve cut its benchmark interest rate by a quarter point to 4.5 percent and signaled it’s reluctant to reduce borrowing costs further.

“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,” the Federal Open Market Committee said in a statement after meeting today in Washington. “After this action, the upside risks to inflation roughly balance the downside risks to growth.”

Policy makers lowered rates for a second month even after reports today showed the economy expanded more than forecast last quarter and companies stepped up hiring. Stocks fell after the Fed statement, which also warned that higher energy and commodity prices may spur faster inflation.

The Fed acknowledged that “economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance.” At the same time, “the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.”

Today’s decision wasn’t unanimous. Kansas City Fed President Thomas Hoenig preferred no change.

The Fed also lowered the discount rate, the cost of direct loans to banks, by 25 basis points to 5 percent, from 5.25 percent. A basis point is 0.01 percentage point. [MORE]