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Finance

Federal Reserve cuts interest rates to two per cent

30/04/2008

The US Federal Reserve has today announced a quarter-point cut in interest rates.

The cut, to two per cent, was widely predicted by experts.

Since September, the Federal Reserve has slashed rates from 5.25 per cent as it tries to combat the slowing US economy and the global downturn due to the credit crunch.

Analysts had claimed this would be the last cut for the foreseeable future; however, a statement from the US central bank gave no indication that this was the case.

The statement, from the Federal Reserve's rate-setting committee, said: "Recent information indicates that economic activity remains weak.

"Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."

Shares in New York rose immediately after tonight's announcement.

Although, some experts have claimed the world's largest economy is already in a recession after being hit hard by the downturn in the housing market.

Prices throughout the US have risen dramatically in the last few months, with the cost of a barrel of oil rising from $78 (£39) to $113 (£56.9), for example.

A statement from the chairman of the Federal Reserve, Ben Bernanke, is expected later tonight.

Against expectations, the US commerce department announced earlier today that the US economy grew at an annual pace of 0.6 per cent in the first three months in 2008.