Fed cuts rates 0.5%

The Federal Reserve&#39s rate-setting body slashed interest rates 50 basis points yesterday.

The rate cut was expected, but most observers were betting on a quarter-point drop.

The Federal Open Market Committee said yesterday: “The Committee continues to believe that an accommodative stance of monetary policy, coupled with still-robust underlying growth in productivity, is providing important ongoing support to economic activity.

“However, incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment. Inflation and inflation expectations remain well contained.

“In these circumstances, the Committee believes that today&#39s additional monetary easing should prove helpful as the economy works its way through this current soft spot.”

Most consumers will realise little, if any, savings in their monthly bills because of the rate reduction, but this Fed action is as more of a mind game than a monetary move.

Despite the rate drop increasing pressure on the Bank of England to follow suit, the Bank held UK interest rates steady at 4%.

UK interest rates have now been 4% for one year.