US cuts interest rates again

The US Federal Reserve yesterday continued its campaign of interest rate cuts by trimming interest rates by a quarter-point the eleventh cut this year.

The Reserve, chaired by Alan Greenspan, has bought the cost of borrowing down to 1.75% this year in a bid to prevent the country suffering a prolonged recession.

The US economy has been slowing throughout the year, and the terror attacks in New York and Washington exactly three months ago to the day have weighed heavily on the already fragile economy.

Simon Rubinsohn, chief economist at Gerrard, welcomed the reduction, which was widely expected and follows last month’s half-point cut.

He said: ‘‘Although the US consumer is still spending, the signs of recovery are still very tentative. The key is to keep the consumer spending going.’’

Continued consumer spending would reduce stocks, Mr Rubinsohn added, which in turn would spur the beleaguered manufacturing sector into upping production.

David Page, economist at Investec, added: ‘‘The Fed is continuing to err on the side of caution until they are completely satisfied the worst is over.’’

The quarter-point trim was widely predicted by traders, who factored it into yesterday’s session.