MercoPress. South Atlantic News Agency

Lowest US interest rate since 1958.

The US Federal Reserve cut interest rates this Wednesday a quarter percentage the lowest level since 1958 and suggested there could be further measures, since the economy “has yet to exhibit sustainable growth”.

Following the Federal Reserve Open Market Committee, OMC, decision the US basic rate now stands at 1%.

"The Committee judged that a slightly more expansive monetary policy would add further support for an economy which it expects to improve over time", said the OMC emphasizing that recent signal indicate an improvement in consumer expenditure, in financial market conditions and stabilization in the labour market.

However as in its previous May meeting the Fed expressed concern about the risk of deflation, that is when the prices of goods and services start to drop making consumers and investors reluctant to spend.

"Overall, OMC believes that this last concern (deflation) probably will predominate in the foreseeable future".

In spite of expectations of a rebound after the Iraq war, the US economy has been slow in picking up and unemployment now stands at 6,1% a nine year record, from less than 4% in late 2000 which was followed by the mild recession of 2001.

The US economy has been growing at an annual rate of 2%, well below the potential 3% to 3,5% long term expansion.

Some encouraging signals from the US economy a buoyant house market and an encouraging consumer confidence index, have not been sufficient to counter other still non responsive sectors such as industrial production.

Wall Street reacted negatively to the Fed decision since market operators were expecting a stronger message, that is a half percentage cut leaving the basic rate at 0,75%.

This was the thirteenth interest rate cut since January 2001 when the US economy began showing clear symptoms of a recession after an unprecedented boom in the late nineties under former president Bill Clinton.