The US Federal Reserve yesterday cut key short-term interest rates by half a percentage point in an effort to prevent the US economy sliding into recession.
The central bankers, announcing the rate cuts, blamed several factors for the deterioration in the economy, including high energy costs and falling consumer confidence. They also said advances in new technology were distorting inventories.
The rate cut is designed to stimulate business expansion and consumer spending, and was described by the US central bank as a "rapid and forceful" response to the sharp slowdown in the economy.
The extent to which the once booming economy has stalled was underlined by figures published yesterday showing that growth in the last quarter of last year had dropped to 1.4 per cent, the lowest level in five years.
With inflation contained, economists are already forecasting a further rate cut in the coming months.
On Wall Street investors interpreted the mid-afternoon announcement as a reason to take profits from the market's recent gains. The Dow Jones industrial average was up 18.65, but below the approximately 50-point gain it had before the Fed's news. The Nasdaq composite index fell 11.48.