US Federal Reserve chairman, Alan Greenspan tonight announced a cut of half a point in interest rates, in an effort to prevent the slowdown in the US economy sliding into its first recession in ten years.
The decision, issued at 7.15 Irish time, was welcomed on Wall Street where it had been widely anticipated.
The rate cut followed more bleak news on the US economy yesterday which has increased fears of a full-blown recession.
Following the half a per cent cut on January 3rd, the Fed has now cut the rate by a full percentage point in one mongh for the first time. Its aim is to stimulate business growth and consumer spending.
The US Commerce Department announced yesterday that growth for the final three months of last year fell to 1.4 per cent, its weakest performance in more than five years. The figure underscored how dramatically the US economy had slowed since the second quarter of last year, when it grew by a breakneck 5.6 percent rate.
Mr Greenspan told the US Senate budget committee last week that growth for the current quarter is "probably very close to zero." He said that the cause was weakness in consumer spending.
On Tuesday the consumer confidence index fell sharply, underling Mr Greenspan's concerns and making an interest cut inevitable. The Federal reserve last cut its overnight bank lending rate on January 3rd, from 6.5 per cent to 6.0 per cent.
The anemic performance of the gross domestic product - the total output of goods and services produced within the United States - was below even the scaled-down expectations of many private analysts. They were forecasting a growth rate of around 2.2 percent, matching the performance in the third quarter.