WASHINGTON, Aug. 17 (Xinhua) -- The U.S. Federal Reserve judged the downside risks to economic growth has increased "appreciably" while it announced Friday to cut its discount rate by a half-percentage point.

    "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward," the central bank said in a statement.

    In these circumstances, the Fed judges that "the downside risks to growth have increased appreciably" although recent data suggest that the economy has continued to expand at a moderate pace.

    The Fed said that it has approved a half-percentage point cut in its discount rate on loans to banks to "promote the restoration of orderly conditions in financial markets."

    The decision means the discount rate, the interest rate that the central bank charges to make direct loans to banks, will be lowered to 5.75 percent from 6.25 percent.

    This is the Fed's new effort to restore calm to financial markets which have been roiled recently by a widening credit crisis triggered by the U.S. subprime mortgage market. Lenders at the subprime market cater to home buyers with spotty credit.

    Since Aug. 9, the Fed has added a total of 88 billion U.S. dollars to the banking system to increase liquidity.

    In the statement, the Fed said that it "is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets."

    The Fed did not change its target for the more important federal funds rate, the interest commercial banks charge each other on overnight loans. The benchmark interest rate has remained at 5.25 percent for more than a year.