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| Version 4 | Version 5 |
|---|---|
| US interest rates slashed to 1% | US interest rates slashed to 1% |
| (10 minutes later) | |
| The Federal Reserve has cut its key interest rate from 1.5% to 1% in a widely expected move, as it aims to avoid a possible US recession. | The Federal Reserve has cut its key interest rate from 1.5% to 1% in a widely expected move, as it aims to avoid a possible US recession. |
| Earlier this month the Fed cut rates from 2% to 1.5% in an emergency move, which was co-ordinated with five other central banks. | Earlier this month the Fed cut rates from 2% to 1.5% in an emergency move, which was co-ordinated with five other central banks. |
| Interest rates have been slashed since September 2007, when the federal funds rate stood at 5.25%. | Interest rates have been slashed since September 2007, when the federal funds rate stood at 5.25%. |
| The 1% level was last seen between June 2003 and June 2004. | The 1% level was last seen between June 2003 and June 2004. |
| 'Moderate economic growth' | |
| The move is confirmation that inflation is no longer seen as the major threat to the US economy. | The move is confirmation that inflation is no longer seen as the major threat to the US economy. |
| Some analysts in fact fear that deflation could be a risk to the economy, as consumers delay any spending they can in the hope that products will be cheaper in the future. | |
| But the Fed hopes its action will help get credit flowing and "should help over time to improve credit conditions and promote a return to moderate economic growth". | |
| Cutting rates to such a low level however means the central bank is running out of interest rates that it can use as a tool to stimulus in the future. | |
| 'Restraint on spending' | 'Restraint on spending' |
| "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," said the Federal Open Market Committee headed by Ben Bernanke after the unanimous decision. | "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," said the Federal Open Market Committee headed by Ben Bernanke after the unanimous decision. |
| "Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for US exports. " | "Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for US exports. " |
| The committee went on to say that an "intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit". | The committee went on to say that an "intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit". |
| The move follows the latest set of data on factory goods orders from the Commerce Department. | |
| Orders for long-lasting items manufactured in US factories were unexpectedly strong in September, rising 0.8%, following the 5.5% fall in August. | |
| Demand for commercial aircraft grew 29.7% while orders for motor vehicles rose 3%. | |
| Excluding transportation, orders were down 1.1% in September |