US cuts rates by 0.5%
Analysts only expecting 0.25% reduction
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.