A deepening housing slump and the tightening credit market promoted U.S. Federal Reserve policymakers to cut interest rates further at their December meeting to help bolster economic growth, according to the meeting minutes released Wednesday.

    "The information reviewed at the December meeting indicated that, after the robust gains of the summer, economic activity decelerated significantly in the fourth quarter," said the minutes.

    Consumption growth slowed, and survey measures of sentiment dropped further, the minutes said. Many readings from the business sector were also softer: industrial production fell in October, as did orders and shipments of capital goods.

    Meanwhile, employment gains stepped down during the four months ending in November from their pace earlier in the year.

    In the housing market, new home sales were below their third-quarter pace, and sales of existing homes were flat in October following sharp declines in August and September.

    "These declines likely were exacerbated by the deterioration in nonprime mortgage markets and by the higher interest rates and tighter lending conditions for jumbo loans," said the minutes.

    It also said that conditions in financial markets worsened after showing some signs of improvement in late September and October.

    "In view of the further tightening of credit and deterioration of financial market conditions, the stance of monetary policy now appeared to be somewhat restrictive," according to the minutes.

    However, Fed policymakers also expressed concerns that rising energy prices could spread inflation through the economy. "Inflation pressures and risks remained," said the minutes.

    At the meeting held on Dec. 11, the Fed cut a key interest rate by a quarter percentage point to 4.25 percent, the third rate reduction in three months, to help the economy survive the housing slump and credit crunch.

    As a result of the action, commercial banks' prime lending rate, the benchmark for millions of consumer and business loans, would drop by a corresponding amount to 7.25 percent, once again giving borrowers some breathing room.

    Since Sept. 18, the U.S. central bank has cut the federal funds rate, which commercial banks charge each other on overnight loans, by a combined 1 percentage point.

    Many economists expect the economic growth to slow to just 1.5 percent or even less in the final quarter of 2007, compared with a brisk pace of 4.9 percent at annual rate in the third quarter.