The Federal Reserve has offered credit markets a quick shot in the arm with a new $200 billion lending facility, and while this will ease some the liquidity problems, it isn't likely to be enough to keep the U.S. economy out of recession.

Wall Street economists were quick to call the new lending facility a step in the right direction, but what's most needed is time for the de-leveraging of billions of dollars in loans globally.

"This is another tool and, with additional upcoming reductions in the Fed funds rate, this should help what is a painful process," said Chris Wiegand, financial economist at Citigroup. "But it's not the be-all and end-all solution."

(Article continues below)

The Fed, which has cut benchmark interest rates by 2.25 percentage points since mid-September last year, is widely expected to reduce them further when it meets on March 18.

But more is needed as mortgage backed bond prices have plunged, imperiling the value of bank assets, impeding bank lending, while corporate credit costs have soared.

The U.S. dollar has also fallen sharply in the past six weeks, oil prices have risen to new record highs, and benchmark U.S. stock prices have fallen back to near the 18-month lows seen in January.

The Fed's action on Tuesday to allow banks to off-load even private label mortgage backed securities onto the Fed's balance sheet was another attempt to ease the growing credit crisis that policy-makers less than a year ago vowed would be contained to the housing sector.

Some analysts question if the Fed has responded too late.

Full article here.