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USA 'battling on the brink'

Jaimie Kanwar

The US Federal Reserve has taken further action in its ongoing battle to stave off recession...

The cut in the Fed's key interest rate by a quarter point to 2% represents the seventh consecutive reduction since September 2007. The Fed also lowered its discount rate for emergency lending to US banks by another quarter-point to 2.25 per cent.

Official US government figures showed the world's biggest economy grew just 0.6% between January and March, the same rate as the previous three months. Rates have already been slashed five times from the 5.25% mark last summer down to 2.25%.

Housing market a 'drag' on the economy

Data from the Bureau of Economic Analysis showed that the country's housing market was the main drag on the economy, with builders slashing spending on housing projects by a 26.7%. The US economy has been hit hardest by the sub-prime lending crisis, which has seen record numbers of repossessions from poor creditworthy individuals financed during the housing boom.

A spokesperson for the Federal Reserve explained: “Uncertainty about the inflation outlook remains high and it will be necessary to continue to monitor inflation developments carefully.  Rate cuts so far, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity”.

An opportunity for international investors?

Dan Johnson, Managing Director of TheMoveChannel.com, commented: "We've seen a number of agents in the UK turning their attention to finding investment deals in the US, not just in Florida, but in Arizona, Colorado, Georgia, New York State, South Carolina and Texas to name but a few.

"Although this is largely as a result of the weak dollar and the impact this has on the buying power of Sterling any reduction in interest rates by the Federal Reserve is should make these deals even more attractive - provided that the cuts are reflected in the mortgagesoffered to non-residents.

"This is not always guaranteed though,particularly in the current economic climate, so investors should thoroughly check out the availability of mortgage finance before committing any non-refundable fees to a deal".