Recession fear caused US rate cut

The US Federal Reserve cut interest rates by 0.75% last month because some of its members feared a "prolonged and severe" economic downturn.

The minutes of its March meeting, when rates were cut to 2.25%, showed that policymakers were concerned about the housing slowdown and credit crisis.

The Fed has cut rates six times since September to try to boost the housing market and alleviate credit problems.

But two of the members at the meeting favoured a smaller reduction.

"The outlook for economic activity had weakened considerably since the January meeting," the minutes said.

"Some [members] believed that a prolonged and severe economic downturn could not be ruled out given the further restriction of credit availability and ongoing weakness in the housing market."

The collapse of the US sub-prime mortgage market caused turmoil in the financial markets. With banks more reluctant to lend to each other, credit is more difficult to obtain for businesses and consumers.