Fed cuts US interest rate to 0.25 percent

The US Federal Reserve has again lowered interest rates and in a surprise move it has cut them by 0.75 percent.

That is closer to zero than most economists had predicted.

It means that Fed chairman Ben Bernanke and his policymakers are running out of room to cut borrowing costs.

From three percent at the start of the year, the benchmark rate is now just 0.25 percent.

In a statement, the Fed said it would
employ “all available tools” to dispel the year-long recession.

The central bank has already pumped around one trillion euros into financial markets, inflating the US money supply with little fear of inflation as banks remain reluctant to lend.

The US housing collapse has led to the worst financial crisis since the Great Depression in the 1930s and tipped the world’s largest economy into a recession. The downturn is already the longest since the 1980s.

The feeling among economists is that Bernanke and his colleagues will now keep interest rates low until the economy is firmly on the road to recovery, but the experts see little chance of expansion before the middle of next year at the earliest.

The 0.75 percent cut boosted shares on Wall Street while the dollar slipped.

Copyright © 2009 euronews

tags: Economy