US benchmark interest rates are at the lowest level since June 2004 after the Federal Reserve this morning cut its key interest rate from 1.5% to 1%.

The cut was widely expected, as the Fed pulls out all stops to avoid a possible US recession.

Much like the New Zealand Reserve Bank, which cut official rates by a full percentage point last week, the Fed no longer considers inflation as a major threat to the economy.

"The intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit," the central bank said in its statement.

"The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures.

"Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for US exports.”

US short term interest rates have plummeted since September 2007, when the federal funds rate stood at 5.25%. The 1% level was last seen between June 2003 and June 2004.

Wall Street reacted positively to the news; the Dow moved into positive territory after the announcement, having been down 80 points prior.