US Federal Reserve slashes rates

Broader stock indicators also turned lower. The Standard and Poor’s 500 index fell 6.49, or 0.48 per cent, to 1,355.81, and the Nasdaq composite index fell 9.06, or 0.38 per cent, to 2,349.00.

 

“Financial markets remain under considerable stress and credit has tightened further for some businesses and households,” the Federal Reserve said.

 

Last week it cut rates by three quarters of a percentage point – the biggest one day cut in over 20 years – over worries of a downturn.

 

Slower growth

 

The latest cut comes as a government report on Wednesday showed the US economy grew only 0.6 per cent in the last three months of 2007 after consumers halted spending and home construction dwindled.

 

While the economy still expanded 2.2 per cent over the whole year, it was the slowest pace of growth in five years.

 

There was some good news on Wednesday, however, with a private sector report showing employers added three times as many jobs as expected in January.

 

ADP Employer Services said US private employers added 130,000 jobs in January.

 

That led some analysts to boost forecasts for the number of new jobs in January, which the labour department will announce on Friday in its closely watched report on US hiring.

 

On Tuesday, the US House of Representatives approved an economic stimulus package worth $150bn in a bid to prop up the US economy, which has been battered by the ongoing sub-prime mortgage crisis.

 

The bill now passes to the senate for approval, but the senate recently put together its own $156bn plan with different levels of tax rebates.

 

The sub-prime mortgage crisis began when mortgage loans were offered to people with poor credit records, who later became unable to repay the money.