Fed cuts US interest rates

The Federal Reserve cut the cost of borrowing by a quarter of a percent today.

The drop in US interest rates to 4.5%, which was widely expected, has helped the UK's pound soar to a 26-year high against the dollar.

The US central bank, which also cut rates by half a point last month, made the announcement at the conclusion of its two-day meeting.

Many US investors, uneasy after a drop in consumer confidence, feared economic growth could halt if rates were not lowered following the troubles in the housing and credit markets.

The Conference Board, a leading research organisation, said its index of consumer confidence fell to 95.6 in October – its lowest level in two years.

The index was below the consensus estimate of 99.5 and down from a revised reading of 99.5 in September.

But the Commerce Department said the country’s gross domestic product grew at an annual rate of 3.9% in the third quarter, a faster pace than the 3% growth economists forecast, on average.

In another economic reading, construction spending had its best showing in four months.