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Fed cuts rates again

31/10/2007

The United States Federal Reserve has cut interest rates by a quarter-point, in a move widely expected by traders.

Borrowing rates across the Atlantic were lowered to 4.5 per cent in what a statement by the federal open market committee said was designed to help the American economy through the current credit crunch.

Together with the September 16th move to cut interest rates from 5.25 per cent to 4.75 per cent, the committee said today's action "should help forestall some of the adverse on the broader economy that might otherwise arise".

Nine of the ten committee members voted in favour of the cut, which follows ongoing instability caused by the collapsing sub-prime mortgage market in the US.

The committee said that despite the knock-on turbulence on the global markets, the US economy had performed strongly in the third quarter.

But it warned that "the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction".

Analysts say the news will come as a boost to gloomy American consumers, who according to a new report released yesterday are suffering their worst confidence levels in two years.