US interest rates cut to 5%

The US central bank cut the cost of borrowing for the third time in as many months yesterday warning that the world's biggest economy faced "economic weakness in the foreseeable future".

The Federal Reserve Board said that the sudden collapse in the US stock markets had stymied consumer spending and that big business was under pressure.

President George W Bush, in an attempt to clarify his earlier contradictory statements, said he was upbeat about American growth over the long term despite "short-term problems".

But for the many in the financial markets, the move to 5% was seen as "too little, too late".

Within 10 minutes of the announcement, the Dow Jones had fallen more than 10 points, erasing a 46-point gain earlier in the day which had taken it above the psychologically-important 10,000 level.

The US move comes just 24 hours after central bankers in Japan returned to zero interest rates to steady the country's precarious finances.

The Bank of England's Monetary Policy Committee will meet on April 5 with some economists predicting another quarter per cent cut in rates bringing them down to 5.5%.