The US Federal Reserve announced yet another rate cut on Wednesday, this time reducing the key interest rate by half a percentage point.

The most recent rate cut ordered by the Federal Reserve has now brought the federal funds rate in US down to one percent - a level last seen in 2003-2004. the last time the rate had gone lower than this was almost half a century ago, in 1958 when the country had Dwight Eisenhower as the President.

the federal funds rate is the rate at which banks lend to each other and is thus crucial in determining the flow of credit through an economy’s financial system. The recent market crisis and the massive losses incurred by banks had led to a virtual freeze in the lending system which is why federal agencies were required to step in and restore confidence. Also on Wednesday, the US government finally began distributing from the billions of dollars approved for finance rescue package.

However many finance experts warn that credit lines cannot be opened up merely by bringing about cuts in key interest rates. The huge losses incurred by the banks in bad mortgages have now made them reluctant to extend new loans.