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The US Federal Reserve has cut interest rates by 50 base points, from 2.5 to 2 per cent, bringing them down to the lowest level since the Kennedy era in the early 1960s.
It was the 10th time this year that the Fed has cut its short-term target for lending rates in an attempt to prevent the United States falling into recession, and the third since the September 11th attacks on New York and Washington.
The Fed decision to continue its aggressive monetary policy was prompted by alarming economic data in recent days, including a drop in consumer confidence to its lowest point in 7 years.
The Federal reserve policy committee said that for the forseeable future the risks are weighted mainly towards conditions that may create economic weakness.
Wall Street immediately rallied on the news.
The government announced last week that the US experienced negative growth in the third quarter, falling 0.4 per cent despite almost monthly cuts which brought lending rates down from 6.5 in January.
The shock news on Friday that the jobless rate had shot up from 4.9 to 5.4 percent in the wake of the September 11th attacks convinced many analysts that the US economy is already in recession - technically defined as two successive quarters of contraction.
US interest rates are now well below the annual inflation rate of 2.6 percent, as measured by the Consumer Price Index, signalling a very aggressive attempt by the Fed to stimulate the economy.
Congress is meanwhile debating a fiscal package of up to $100 billion aimed at helping jump-start growth. Senate Majority leader Mr Tom Daschle said after a meeting of Congressional leaders with US President George W Bush yesterday that he hoped the stimulus "will trigger the economy by the end of the year".