The US Federal Reserve cut interest rates by 0.5 percentage points to 1 per cent on Wednesday to the lowest level since June 2004 in an effort to keep the US economy out of a prolonged recession, dpa reported.
The US central bank acknowledged that economic activity had "slowed markedly," in a statement from the Fed's board of governors. Turmoil in financial markets had intensified and further restricted the availability of credit to both households and businesses, the Fed said.
The unanimous decision to cut the benchmark federal funds rate was in part made possible by declines in energy and other commodity prices that have helped ease inflation fears.
The Fed also expressed confidence that the rate cut, coupled with joint steps in the past with other central banks and efforts to stabilize the financial system "should help over time to improve credit conditions and promote a return to moderate economic growth."
There was no mention of a recession in the Fed's statement. The government's first estimate of US third-quarter growth is due out Thursday.
The Fed also cut its discount lending rate to banks by 0.5 percentage points to 1.25 per cent.