US Federal Reserve policymakers sliced a quarter point off key interest rates today in their seventh cut of the year.
Members of the Federal Open Market Committee trimmed the benchmark federal funds rate by 25 basis points to 3.50 per cent, three percentage points below the rate at the start of this year.
They also cut the largely-symbolic discount point by a quarter point to 3.0 per cent.
Long-term prospects for productivity growth and the economy remained favourable, the policy-making Federal Open Market Committee said in a statement.
But "the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future," it added, opening the door to another easing in October.
Business investment was dragging down the US economy, the Federal Reserve policymakers said.
"Household demand has been sustained, but business profits and capital spending continue to weaken and growth abroad is slowing, weighing on the US economy," they said in the statement.
But the easing of pressures on labour and product markets was expected to keep inflation contained. Markets had been banking on a rate cut to soothe mounting fears over the US economic outlook.
US economic growth, hampered by falling business investment amid carnage in the high technology sector, stalled to a mere 0.7 per cent in the second quarter.
That figure may even be revised lower this month, possibly showing a contraction, analysts say.
Vital signs for the economy are now mixed.
US manufacturers held output steady in July, ending nine months of falling production. A closely-watched barometer of future activity, the leading index compiled by the private Conference Board, rose for the fourth straight month in the same month.
But share prices remain weak. The technology-heavy Nasdaq index has dropped about nine per cent since rates were last cut June 27th. And the Federal Reserve's latest Beige Book report said a decline in manufacturing activity began to spread into other areas of the economy in June and July.
AFP