US Federal Reserve slashes rates

by Rachel Nixon | March 18, 2008 at 11:29 am

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Amid concerns over the state of the US economy and jittery financial markets, the US Federal Reserve has cut interest rates by three quarters of a percentage point.

The central bank lowered rates to 2.25% from 3%, but the cut was smaller than financial markets had expected.

Many economists believe the US economy is already in a recession.

The Fed has taken strong action this week to avert a financial panic after investment bank Bear Stearns was forced into a fire sale to avoid collapse.

US Treasury Secretary Henry Paulson admitted earlier on Tuesday that the US economy was facing a "sharp decline" at the moment, but hoped for a recovery later in the year.

The Fed has now lowered rates six times since mid-September in a bid to boost the economy, which is reeling from the credit crisis that was triggered by a slump in the US housing market.