US cuts rates by 0.5%

The US Federal Reserve, in an
effort to take the pressure off the current credit crisis, has cut interest
rates by 0.5%, the first time they have been reduced since mid-2006.

The lending rate was cut from 5.25% to 4.75% and its effect was immediately
felt with shares climbing to four year highs.

Analysts were only expecting a 0.25% cut to prevent further damage from the
housing market downturn and credit problems.

However fears remain that reducing the rate by 0.5% will increase consumer
spending, pushing up inflation to uncontrollable levels.

Further reading:

Credit crunch: assessing the damage

US venture capital deals highest since 2001

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