The Federal Reserve slashed its benchmark interest rate last month, cutting by 125 basis points in the space of seven trading sessions. The overnight borrowing target rate is now 225 bps lower than it was in mid-September, a month after the credit crisis first surfaced.

Since then, US economic growth has decelerated from a dazzling 4.9 per cent third quarter performance to a lowly 0.6 per cent during the final three months of the year. At the same time, consumer spending remained solid and the unemployment rate hovered around a relatively low 4.9 per cent.