Fed rate cut to near zero - Good or Bad Tactic?

The Federal Reserve cut the overnight bank rate yesterday (called the federal-funds rate) from 1% down to 0% to 0.25%.  Clearly, there is very little room left to cut. But, is it likely that this latest rate cut will improve economic conditions? 

The current round of interest rate cuts began in August, 2007. Clearly, these cuts have not stopped the current economic deterioration. The stock market and the economy started to sink in November 2007. Real estate prices have tumbled, there are record levels of foreclosures and,  just yesterday, the Labor Department reported a 1.7% drop in consumer prices in November for the biggest such decline since February 1947. 

The Fed cut rates during the last recession in 2001 to 2002, but economic conditions did not improve until President Bush proposed a tax cut in April 2003 that took effect later in the year. GDP growth for the 4th quarter of 2002 was only 0.2% and just 1.2% in the 1st quarter of 2003. But once the tax cut looked like it was going to pass, look what happened to economic growth: 

• 3.5% in the 2nd quarter 2003
• 7.5% in the 3rd quarter 2003
• 2.7% in the 4th quarter 2003
• 3.0% in the 1st quarter 2004
• 3.5% in the 2nd quarter 2004

Economic weakness did not start to appear until the 3rd and 4th quarters of 2006 and the 1st quarter of 2007 when the GDP growth was 0.8%, 1.5% and 1.0% respectively. The first economic contraction occured in the 4th quarter 2007 when GDP lost 0.2% - just as the stock market started to sink.