WASHINGTON -- The Federal Reserve lowered short-term interest rates yesterday and got a quick nod of approval from the bond market amid a growing conviction that inflation will not be much of a problem in a weak -- and possibly faltering -- U.S. economy.

The move followed renewed calls by the Bush administration for the Fed to abandon its neutral position on rates in the face of a sharp slowdown in the money supply, as well as calls by members of Congress to remove Fed anti-inflation "hawks" from their role in formulating policy.

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