The US Federal Reserve has cut interest rates by a half of one percent. They’re now pegged at 4.75 percent.
Some analysts suggest the size of the cut indicates just how serious the effect of the current financial crisis is having on the US economy.
Amid the background of a credit squeeze and housing crisis in the US the interest rate cut could ease tensions in markets where banks lend to each other.It is also expected to help calm fears of a US-led recession and to boost consumer spending.
US producer prices fell by a much larger than expected 1.4 percent in August.
In cutting interest rates the Fed’s policy makers appear set on warding off the impact of a credit crunch on the wider economy.
Citing a draft version of the International Monetary Fund’s Economic Outlook Italian news agencies report the IMF has slashed its 2008 US growth forecast from 2.8 percent down to 2.2 percent mostly due to the crisis in the sub-prime mortgage sector.
The IMF reportedly only modestly changed its forecast for growth in the euro zone.