NEW YORK (Bloomberg) — The Federal Reserve cut its benchmark interest rate by half a percentage point to one percent, matching a half-century low, in an effort to avert the worst US economic downturn in the postwar era.

"Downside risks to growth remain," the Federal Open Market Committee said yesterday in a statement in Washington. "Recent policy actions, including today's rate reduction, coordinated interest-rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth."

Central bankers worldwide are trying to revive credit and stop a self-reinforcing downturn in consumer spending and bank lending from triggering a global recession. Today's decision follows the half-point reduction the Fed coordinated with the European Central Bank and four other central banks on October 8. Borrowing costs were also pared yesterday in Norway and China.

The US economy shrank at a 0.5 percent annual rate last quarter, the most since the 2001 recession, the Commerce Department's report on gross domestic product will probably show tomorrow. Economists expect the slump to persist in the fourth quarter, according to the median estimate.

"This is probably going to be the worst downturn of the post World War II era," Allen Sinai, chief economist at Decision Economics in New York, said in a Bloomberg Television interview before yesterday's announcement. "It's going to be bad, it's going to be long, it's going to be deep. We have quite a bit yet to go before we're through."

Plunging commodity prices, including a 54 percent decline in the cost of oil from a record in July, have eased inflation pressures.

The vote was unanimous. The Fed also lowered the discount rate a half point to 1.25 percent.

While cutting the main rate during the past 13 months from 5.25 percent, Fed chairman Ben Bernanke, 54, has created six loan programmes channelling at least $700 billion in cash and collateral into money markets as of October 22.

"This Federal Reserve has been extremely aggressive in terms of providing liquidity," Frederic Mishkin, a former Fed governor and now a Columbia University professor, said in a Bloomberg Television interview before the announcement.

Still, consumer confidence tumbled this month to a record low, and orders for durable goods, excluding automobiles and aircraft, dropped for a second straight month in September, reports showed this week. Home prices in 20 US cities declined 16.6 percent in August from a year earlier as foreclosures climbed, according to the S&P/Case-Shiller home price index. The Standard & Poor's 500 Stock Index is down 36 percent this year.

"Clearly, confidence has been shocked," Lewis Alexander, chief economist at Citigroup Global Markets Inc., said in a Bloomberg Television interview before the announcement. "The real issue is looking beyond Christmas and how quickly the consumer recovers."