Citing deep uncertainty in the US economy, the US Federal Reserve this afternoon cut interest rates by 50 basis points, to their lowest level since the Kennedy administration of the early 1960s.
In the ninth successive rate cut this year, the Fed reduced short-term inter-bank loan rates from 3 per cent to 2.5 per cent and reduced the discount rate from 2.5 to 2 per cent.
Nine months ago, before the Fed began its series of cuts to ward off recession, the overnight rate stood at 6.5 per cent.
The Fed has already acted aggressively to cushion the economic shock of the attacks on the United States on September 11th, dropping rates from 3.5 per cent to 3 per cent on the day the markets re-opened six days after the destruction of the World Trade Centre.
The announcement came at 2.15 p.m. (7.15 Irish time) after a scheduled meeting in Washington of the Federal Reserve open market committee under chairman Mr Alan Greenspan which sets interest rates.
The Fed said it continues to believe that riks are weighted towards economic weakness in the foreseeable future. Its ominous tone forced a new sell-off in stocks with the Dow Jones Industrial Index falling into negative territory for the first time yesterday in the immediate aftermath of the announcement.
The new 'target' interest rate is now below August's 2.7 per cent inflaton rate, excluding volatile food and energy prices. This makes the 'real' interest rate zero or slightly negative for the first time in nine years.