"The committee judged that a slightly more expansive monetary policy would add further support for an economy which it expects to improve over time," said the Federal Open Market Committee.The dissenting vote was by San Francisco Federal Reserve president Robert Parry, who had called for a cut of half a percentage point to 0.75%.
Until June 25 decision, US interest rates had been held steady at 1.25%, a 42-year low. This followed 12 cuts to the rate since January 2001, when the US economy first began to falter after an unprecedented boom in the late 1990s.
US stocks reacted badly to the news and the Fed's guarded economic outlook. Both the Dow Jones industrial average and the Nasdaq tech index gave up gains.
The Dow Jones fell about 1% to close at 9,011.53, while the Nasdaq shed 0.19% to 1,602.63. The dollar, however, advanced, reversing previous losses, after relief that the Fed has opted for a smaller cut.
"This [cut] certainly wasn't as dramatic a move as it could have been, and at the margin it's positive for the dollar providing we see positive US growth numbers continuing to come through," said Tim Stewart, chief currency strategist with Morgan Stanley in New York.
EU AGREES 'RADICAL' FARM REFORM
European Union agriculture ministers have agreed reforms to the controversial system of paying subsidies to farmers.
The enormous 43bn euro ($50bn, £30bn) subsidies, widely-criticised for distorting global trade and hurting poor countries, will be substantially reduced.
EU farm commissioner Franz Fischler, who first proposed the reforms, said the accord marked "the start of a new era" and would fundamentally change the 45-year-old Common Agricultural Policy (CAP).
But farmers and unions were already fearful that they would be driven out of business without the subsidies they have been accustomed to.
Germany's DBV farm union said the deal would cost German farmers between 1.2bn and 2bn euros in lost income, and they would especially struggle with reduced milk prices.
Campaigners on development issues said the deal was a blow to developing countries and would not stop poor farmers going out of business.
The breakthrough deal comes after three weeks of talks, and the original proposals have been watered down.
France, Spain and Ireland insisted on the changes as the price for making an agreement, and only Portugal was left opposing the deal.
Under the deal, most of the subsidies that reward farmers according to how much food they grow will be abolished.Farmers will receive a single payment, rather than grading the amount of money in line with the amount of food produced.
Individual countries will be able to stick to the old system if there is a risk that the new system would lead to the land being abandoned. The prices at which the EU intervenes to support farmers are to be cut in key sectors, including milk powder and butter.
UPTURN HOPE FOR JAPANESE ECONOMY
The latest economic figures have buoyed hope of an upturn in Japan's stagnated economy.Industrial output enjoyed its strongest rise in a year while the unemployment rate held steady.
Strong demand for electronic products, especially from the US, helped push Japan's industrial output 2.5% higher in May.And, while the overall unemployment figures were unchanged at 5.4%, analysts said the tide of job losses in the manufacturing sector was easing.
"The upward pressure on male unemployment seems to have ended as manufacturers have finished massive restructuring programmes," Shun Maruyama, an economist at UFJ Institute, said.The Japanese economy is heavily dependent on exports to the US and was sent back into its long, drawn-out recession as the US economy slowed.
US TACKLES GAS CRISIS
The Bush administration has held an emergency meeting to discuss how to control soaring natural gas prices and ensure stable supply during the winter.
The US energy department has warned that the average residential winter heating bill for a typical Midwest consumer could rise by as much as 19% this year.
Such enormous rises are likely to stem consumer spending and damage the chances of an economic rebound.Gas stocks began the summer at the lowest level since the 1970s and wholesale gas prices have doubled since last year.
MUGABE SEEKS LIBYAN FUEL
Zimbabwe President Robert Mugabe has travelled to Libya in another attempt to solve his country's desperate fuel shortages.
Government-controlled radio in Zimbabwe said President Mugabe was leading a high-powered delegation to Tripoli for talks with the Libyan leader Colonel Muammar Gaddafi.Zimbabwe has suffered chronic fuel shortages for three years.
US GROWTH FIGURE CUT
The US economy grew at a much slower rate than previously thought at the beginning of the year, according to the latest official measure.
Figures from the Commerce Department showed that US gross domestic product (GDP) — the most commonly used measure of economic output — grew at an annual rate of 1.4% during the January to March period.The figure was a big drop from the previous estimate of 1.9%.
The new figure comes just a day after the US Federal Reserve cut interest rates to 1% — the lowest level for 45 years — in an attempt to stimulate the economy.Investment levels were reduced and companies added much less to stock building than previously thought.
The Commerce Department found that inventories grew at an annual rate of only $4.8bn (£2.9bn) during the January to March quarter, compared with a previous estimate of $13.2bn.
NIGERIA BANKER BACKS FUEL PRICE RISE
The governor of Nigeria's central bank has defended a government decision to slash fuel subsidies which has angered trade unions into calling a general strike from next week.Ending the subsidy was "the right thing to do," Dr Joseph Oladele Sanusi told.
Propping up fuel prices "has been creating a lot of problems for the Nigerian economy," he said.Nigeria's President Olusegun Obasanjo wants to raise fuel prices by 65% as he believes the subsidy would be better spent on improvements in health and education.
ITALY HIT BY POWER CUTS
A surge in demand following a heatwave has led Italian electricity firms to order the first country-wide power cuts for more than 20 years.Soaring temperatures have led people to switch their air conditioners, fans and refrigerators on to full power.
The jump in demand has stretched the country's national grid to breaking point and utility firms cut power for up to one and half hours in major cities last week.The operator of Italy's national grid, GRTN, blamed the cuts on an unexpected cut in power imports from France.
ARGENTINA GETS IMF THUMBS UP
The International Monetary Fund (IMF) says it has reached agreement with Argentina's new president to start negotiations for a three-year debt relief programme to the country over the coming weeks.This would replace a short-term programme which runs out in August.
IMF Managing Director Horst Koehler made the announcement in the Argentine capital, Buenos Aires, at the end of a two-day visit to the country.Mr Koehler said he was surprised by the level of recovery he had seen in Argentina.UK AND RUSSIA SIGN PACT ON UNDERSEA GAS PIPELINE
Britain and Russia tied their energy futures firmly together with the unveiling of a major agreement to build a pipeline under the Baltic Sea to bring Russian gas supplies to Britain.The "memorandum of cooperation" was sealed in London as visiting Russian President Vladimir Putin and British Prime Minister Tony Blair looked on.
It covers a proposed multibillion-dollar pipeline to be built by Russian gas giant Gazprom under the Baltic Sea to Britain, via continental Europe.
The deal was formally signed by British junior trade minister Stephen Timms and Russia's energy minister Igor Yusofov at the start of a so-called "energy summit" in central London, on the third day of Putin's ongoing state visit to Britain.
Only minutes beforehand, British oil group BP and Russia's TNK announced they had finalised a separate deal for an oil joint venture in Russia worth 6.15 billion dollars (5.3 billion euros).
'NEEDS STRONGER RAND'
The governor of South Africa's central bank has said he would like to see the country's currency strengthen.Tito Mboweni told a parliamentary finance committee that he did not have a target level in mind for the rand but that he would like to see it "much stronger than it is now".
US HOUSING GIANT RESTATES PROFITS
The US mortgage lender Freddie Mac plans to restate upwards its profits for the past three years by $1.5bn (£902m) to $4.5bn.
BOOST FOR SMALL BUSINESS IN AFRICA
The World Bank is considering the unprecedented step of giving funds from its so-called 'soft money' arm directly to small companies in Africa.
Under the plan, the bank will use lend a blend of public and private money to lend to small and medium-sized business in sub-Saharan Africa.
GERMAN BUSINESSES PREDICT RECOVERY
There was a glimmer of hope for the stagnated German economy after firms said they expected business to pick-up during the next six months.
The Ifo business index, based on the expectations of 7,000 firms, surprised analysts by rising for the third month in a row."The business climate index improved in all areas, especially in the retail sector," Ifo President Hans-Werner Sinn said.
Despite the improvement, the Ifo Institute is still predicting that the eurozone's largest economy will stay stuck in the doldrums this year, recording zero growth.
And analysts were also worried about the impact of this month's three-week strike that has halted production at key car factories in eastern Germany.
WEAKER POUND 'PROTECTED UK ECONOMY'
The fall in the value of the pound has helped to cushion the UK economy from global economic difficulties over the last year, outgoing Bank of England governor Sir Edward George has said.
Sir Edward, who retires shortly, said the worldwide economy had suffered two setbacks over the past year in the shape of the Iraq war and the fallout from corporate scandals in the US.
But, speaking at his final Treasury Select Committee meeting on inflation, he said that while the UK was inevitably affected by these "we have a bit of a cushion from the weakness of the exchange rate".
After a period of strength, the pound has fallen since the end of 2002 and is down 6% against the euro in 2003.
INDIA HOPES FOR IRAQ OIL SHARE
India's largest oil and gas exploration company has said it is hopeful of keeping Iraqi oil exploration rights granted under Saddam Hussein's regime.
Oil and Natural Gas Corporation (ONGC) also said it was in talks with other oil firms to expand its oil exploration contracts in Iraq and expects to increase its investment there.
SRI LANKAN SHARES SURGE
Sri Lanka's stock market has hit an eight-year high, as investors shrugged off worries about a suspected Tamil Tiger killing of a policeman in Colombo and bet on renewed progress in peace talks.
The Colombo Stock Exchange's CSE index was up 4.5% by the close of trading June 23 to 1,039.95, a level last reached in January 1995.
Goldman Sachs Group Inc, second-quarter profit rose 23 per cent as revenue from trading bonds, currencies and commodities increased. The New York based firm more than double its dividend to 25 cents a share.