The Federal Reserve last night signalled that it would not risk Japanese-style deflation gripping the world's biggest economy when it cut interest rates in the United States to their lowest level in 45 years.
America's central bank warned that deflation posed a bigger threat to the health of the US economy than inflation as it justified the quarter-point reduction in interest rates to just 1%, a level not seen since 1958.
In a move that may trigger similar action by the Bank of England next month, the Fed expressed disappointment at the sluggish pace of recovery following the swift and successful ending of the war against Saddam Hussein.
Weak durable goods orders yesterday were the latest evidence that the US is struggling to return to the high levels of growth seen during the boom years of the late 1990s.
