Split on impact of cut in rates

THE euro hit a new record high against the dollar of $1.3988 (€1.00175) in early trading yesterday as the US interest rates were cut by a full 0.5% to prevent a full-blown economic crisis engulfing the US.

In later trading the European currency eased slightly and was down at $1.3976 (€1.00109) by mid-afternoon trading. US economists were split on the impact of the cut in rates.

Some saw the move as positive arguing it would restore confidence to money markets in turmoil since early August after the subprime crisis broke in the US. Some said the move could trigger a bout of inflation that could prove difficult to contain given the rise in oil prices and the rapid rise in food prices starting to hit all retail markets.