This is the VOA Special English program, IN THE NEWS.
The United States central bank cut interest rates again this week. The Federal Reserve reduced its major, short-term rate to two percent — the lowest level in forty years.
It is the tenth time that the Federal Reserve has cut interest rates since January First. Officials hope the rate cuts will get Americans to spend more money. They say the cuts also will help businesses to launch projects delayed since economic activity began to weaken earlier this year.
The cut in the federal funds rate Tuesday was bigger than some observers had expected. Experts say it shows that the central bank believes the American economy is still weak.
The Federal Reserve released a statement to explain its actions. It said economic activity is being affected by concerns about poor business conditions in the United States and other countries. The statement suggests there could be another rate cut as early as next month. Officials say that a combination of low interest rates, tax cuts and government spending may increase business activity and lead to economic expansion.
Shortly after the rate cut Tuesday, American banks reduced rates for millions of loans to five percent. Economists hope the lower costs of borrowing money will lead to more spending and investment. The rate cuts are generally good news for businesses and individual Americans. Debt payments may be lower if interest rates are lower. Businesses and individuals with higher interest rate loans can try to re-finance the loans and save money.
The American economy expanded for a record ten years. Most economists believe this period of expansion ended even before the terrorist attacks two months ago. They say economic production decreased in the period between July and September.
Some experts believe that economic production is continuing to decrease during the current three-month period. This could be the official evidence that the world’s largest economy is in a recession.
Many Americans are spending less because of concerns about the general economy and their jobs. Companies are dismissing workers. Four-hundred-fifteen thousand jobs were lost in the United States during October. That was the largest drop in employment in twenty years.
Some people believe the government can rescue the economy. Early this year, President Bush and Congress agreed on a measure to cut taxes.
Congress now is considering other ways to help the economy. The House of Representatives has already approved a plan. Critics say the plan would give too much money to businesses. They say it does not do enough to help individual Americans. They note that spending by individuals is responsible for about two-thirds of all economic activity in the United States.
This VOA Special English program, IN THE NEWS, was written by George Grow.