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| Version 0 | Version 1 |
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| Fed delivers second US rate cut | Fed delivers second US rate cut |
| (about 2 hours later) | |
| The US Federal Reserve has voted to cut US interest rates from 4.75% to 4.5% to help revive the country's faltering housing and credit markets. | The US Federal Reserve has voted to cut US interest rates from 4.75% to 4.5% to help revive the country's faltering housing and credit markets. |
| The move had been widely expected by traders, who have been relentlessly selling the dollar and buying higher yielding currencies in anticipation. | The move had been widely expected by traders, who have been relentlessly selling the dollar and buying higher yielding currencies in anticipation. |
| It comes despite surprise data showing that the US economy grew at its fastest rate in 18 months in its third quarter. | It comes despite surprise data showing that the US economy grew at its fastest rate in 18 months in its third quarter. |
| It follows last month's dramatic rate cut - the Fed's first in four years. | It follows last month's dramatic rate cut - the Fed's first in four years. |
| The news drove the UK pound even higher against the US dollar, as traders exchanged the greenback for sterling for a higher rate of return. | |
| As it is thought that UK interest rates will stay unchanged at 5.75% when the Bank of England's rate setting committee meets next week, the pound has become very attractive against the US dollar and hit a number of 26-year highs against it on Wednesday - the latest at $2.08. | |
| Meanwhile, shares on Wall Street also climbed on the Fed's downward move, with the Dow Jones index of largest shares up 0.85% at 13,907.9, while the S&P 500 broader index also rose 0.8% at 1,544.8. | |
| But analysts said gains were muted as a result of the Fed indicating that its decision did not necessarily signal a downward trend in interest rates, with the cut to 4.5% enough to deal with the economy's troubles. | |
| In a statement after Wednesday's meeting, Fed policy makers said "the upside risks to inflation roughly balance the downside risks to growth". | |
| This suggests that the need to keep inflation risks under control is still a priority for the Fed, particularly with oil prices bubbling to new record highs almost daily. | |
| Continuing concerns | Continuing concerns |
| In September, policy makers at the Fed voted unanimously to cut US interest rates from 5.25% - a level where they had sat since mid-2006 - to 4.75%. | |
| The bold intervention in financial markets was designed to restore confidence in the nation's housing market, which has badly suffered from the repercussions of two years of interest rate rises between 2004 to 2006. | The bold intervention in financial markets was designed to restore confidence in the nation's housing market, which has badly suffered from the repercussions of two years of interest rate rises between 2004 to 2006. |
| These rises have been reflected in the rate at which mortgages have been set. | These rises have been reflected in the rate at which mortgages have been set. |
| They have particularly hurt those with poor credit ratings or on low incomes, who had been sold sub-prime home loans when borrowing costs were cheap. | They have particularly hurt those with poor credit ratings or on low incomes, who had been sold sub-prime home loans when borrowing costs were cheap. |
| A Congressional committee report said last week that up to two million US families - especially those considered risky lenders - could eventually lose their homes as borrowing cost rises filter through and lenders become more choosy as to who they lend to. | A Congressional committee report said last week that up to two million US families - especially those considered risky lenders - could eventually lose their homes as borrowing cost rises filter through and lenders become more choosy as to who they lend to. |
| Many analysts had taken the view that more rate cuts would be necessary to relieve the pain of higher borrowing costs on house buyers and consumers, which account for a critical two-thirds of US gross domestic product. | Many analysts had taken the view that more rate cuts would be necessary to relieve the pain of higher borrowing costs on house buyers and consumers, which account for a critical two-thirds of US gross domestic product. |