It is the first reduction of the short-term interest rate and the thirteenth cut since the beginning of 2001 in the United States.

The reduction pushed the short-term interest rate in the country to the lowest point since 1958 in a bid to energize the US consumer spending and business investment.

The federal funds rate -- the interest banks charge each other on overnight loans -- is US Fed's main lever for influencing the economy.

The US Fed also lowered the US discount rate by 0.25 percentage points to 2 percent.

A statement released by the Federal Open Market Committee (FOMC), the policy-maker of the US Fed, said that the FOMC "continues to believe that an accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity."

However, the FOMC admitted that the US economy "has yet to exhibit sustainable growth."

"With inflationary expectations subdued, the Committee judged that a slightly more expansive monetary policy would add further support for an economy which it expects to improve over time," the statement said.

With the latest lowering of the funds rate, US commercial banks were expected to cut their prime lending rates -- the benchmark for many consumer and small-business loans -- by a similar quarter point, from the current rate of 4.25 percent to 4 percent, the lowest level since 1959.

(Xinhua News Agency June 26, 2003)