US Federal Reserve Chairman, Mr Alan Greenspan has announced a 0.5 per cent cut in the key US inter-bank interest rates in an effort to keep the record US economic expansion from ending.
The action follows a huge sell-off on Wall Street, where the Dow Jones Industrial Average last week suffered its biggest weekly drop in 11 years.
Many investors had hoped for a larger cut of 0.75 per cent, and the disappointment showed in a steep decline on the Dow industrials and the Nasdaq.
The rate that banks charge each other in the US now stands at 5.0 per cent after a full percentage point cut in January.
The prime lending rate, the benchmark for millions of business and consumer loans, which fell to 8.5 percent in January, is expected to fall by a similar margin as commercial banks cut their prime lending rates in response to the Fed's action.
The Federal Reserve said it was cutting rates because the risks were weighted mainly towards conditions which indicate economic weakness in future.
The decision not to cut deeper was clearly influenced by positive signs for the economy, including a solid housing market, still-low unemployment, which stands at 4.2 percent, lack of inflation and modest job growth.