US interest rates expected to hit 39-year low

US interest rates are expected to be cut to their lowest level for 39 years when the Federal Reserve meets.

Analysts believe Fed chairman Alan Greenspan will announce that the key federal funds rate is being cut by 50 basis points to 2.5%.

Those pressing for the ninth rate cut this year, and the second since the terrorist attacks on September 11, say it will boost waning consumer confidence.

Research by the Conference Board in New York and the University of Michigan says consumer confidence has fallen to its lowest point since the Gulf War.

The Conference Board reading fell by 14.4% in September, the largest one-month tumble since October, 1990, when the US was preparing to go to war against Iraq following its invasion of Kuwait.

Treasury Secretary Paul O'Neill now believes that US gross domestic product could drop into negative territory in the just-completed July to September quarter.

But he still believes growth can resume in the fourth quarter.

President George Bush is due to meet congressional leaders later today, as the White House and lawmakers continue to work towards agreement on a package of financial measures. Economists believe the total package could reach £101bn.