WASHINGTON — Emphatic as it was, the Fed's interest rate cut was no quick cure-all for the economy.

The fallout from the risky-mortgage debacle is still with us. There probably will be more losses for financial companies. And, even though mortgage rates are declining, the credit crunch has made it more difficult for home buyers to get loans. That's adding to the pileup of unsold homes — which will take time to sell.

Wall Street is wary.

"It's incremental help. The Fed is trying to address the damage without knowing the true extent of the damage," said Anthony Sabino, professor of law and business at St. John's University. Still, he added: "Time heals all wounds."

The Federal Reserve sliced rates by a half-point yesterday, delivering new relief to people and businesses squeezed by the ailing economy in an effort to avert or at least soften the blow of a recession.

The bold reduction approved by Fed Chairman Ben Bernanke and all but one of his colleagues came as President Bush and Congress raced to enact a separate rescue package — including tax rebates for individuals and tax breaks for companies.

Heartened by the Fed's newfound aggressiveness, Wall Street rallied but then pulled back, still nervous. The Dow Jones industrials rose more than 200 points after the announcement but ended down 37.47.

Hours before the Fed's action, the government reported that the nation's economic growth had stumbled to a virtual halt. The economy grew at just a 0.6 percent pace from October through December, and for all of 2007 it logged its weakest performance in five years.

The collapse of the housing market, sour mortgage investments and much-harder-to-get credit are weighing on people and businesses alike. Foreclosures have hit record highs, and banks have racked up multibillion-dollar losses. The fallout has shaken Wall Street, catapulted the economy to Topic A among worried families and galvanized political figures, including those vying to be the next president.

"The economy is hanging by a thread," said Stuart Hoffman, chief economist at PNC Financial Services Group.

It was the second Fed rate cut in just over a week, and the policymakers signaled they were prepared to keep going lower if needed.

There had been a rare, three-quarter-point reduction last Tuesday. Bernanke had convened an emergency session after stocks worldwide plummeted, intensifying recession fears. The cuts have helped to restore some confidence among skittish investors, but financial markets remain fragile.

More rate cuts are expected at the Fed's next scheduled meeting in March and beyond. Some economists predict the key rate could drop as low as 2 percent this year, which would be the lowest in four years.