Fed cuts US interest rates to 1%

Last night the US Federal Reserve cut interest rates to one per cent – the lowest level since 2003 – when the US was recovering from the aftermath of 9/11.

Earlier this month, the cost of borrowing was cut from 2 per cent to 1.5 per cent in a coordinated move with five other global central banks.

A further cut comes as the US authorities try to hold back the threat of recession.

"The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," a statement from the Federal Open Market Committee said on Wednesday.

"Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for US exports."

The statement added that "intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit".

The Fed said that its actions should, over time, help to improve credit conditions and "promote a return to moderate economic growth".

There have now been suggestions the UK could follow suit over the coming year.

Alistair Darling has hinted the Bank of England should look beyond its immediate target and focus on supporting the ailing economy.