US central bank cuts ratesThe US central bank has cut interest rates by a quarter-point from 2.25 per cent to two per cent.
The cut, which had been expected to take place, is the seventh reduction since the Federal Reserve began cutting rates down from 5.25 per cent last September, in response to growing fears of an economic slowdown
It also means that the federal rate is now at its lowest since December 2004.
The cut comes as figures released on Wednesday showed that the US economy ha
"Recent information indicates that economic activity remains weak," the Federal Reserve said in a statement.
"Household and business spending has been subdued ... labour markets have softened further, financial markets remain under considerable stress and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."
The US stock market rose sharply on the bank's decision, with the Dow Jones up 136 points to 12,968.
Al Jazeera correspondent John Terrett said that the move by the Federal Reserve was widely expected and reflects the fact that the bank sees the prospect of a US recession as a very real threat.
The US economy has been battered in recent months by a downturn in the housing market and the ongoing subprime mortgage crisis, in which people were offered mortgage deals they could not afford to repay.
The US central bank also said in its statement it would continue to monitor inflation, stating concerns that "uncertainty about the inflation outlook remains high."
On April 2 Ben Bernanke, chairman of the Federal Reserve, told US Congress that a "recession is possible," adding that the bank believed there might be a "slight contraction" in the economy in the first six months of the year.
While many economists believe the US to already be in a recession, the expectation is that it will be a short one that could end this summer.
If this is the case, many analysts believe the central bank may hold rates steady for the rest of this year and cut rates next year when the economy is on sounder footing.