US interest rates are set to fall by as much as half a point within three weeks as the prospect of a recession looked inevitable following disastrous consumer confidence data and the biggest decline in American house prices for 21 years.

According to official consumer confidence statistics published today, the US Conference Board showed a slide in sentiment during January far lower than expected, leaving the worst outlook since the early 1990s.

The statistics pointed to an expected 17-year low in consumer confidence.

Wall Street economists explained that should the forecast be borne out, the world's largest economy should expect a fall in real consumption over the year of 1 per cent.

More than two thirds of American economic growth is derived from consumer spending, so a 1 per cent fall would equate to roughly a 0.6 per cent slide in gross domestic product.

Meanwhile, American house prices fell at their fastest rate in 2007 since comparative records began in 1987. According to the S&P/Case-Shiller National house price index, residential property prices fell 4.6 per cent during 2007.

To add to the gloom, the rate at which house prices fell accelerated rapidly throughout 2007.

The value of residential property fell 5.4 per cent in the fourth quarter of 2007, compared with a decrease of 1.7 per cent in the third quarter.

Some cities which had seen the biggest boom in property prices over the last five years saw the sharpest decline with homeowners in Miami suffering a 17.5 per cent fall over 2007 as a whole.

In Detroit, the city further depressed by mass redundancies from car manufacturers last year, home prices fell 14 per cent over last year.

Ian Shepherdson, chief economist at High Frequency Economics, said: "Recession is becoming more likely by the day."

Dimitry Fleming, at ING, the Dutch investment bank, explained that: "the Fed simply can not afford to drastically slow the pace of monetary policy easing. Tomorrow (Wed), during his semi-annual `Humphrey-Hawkins speech', Bernanke will likely reassure markets that they won't. We expect the Fed to deliver another 50 basis points [half a percentage point cut] on March 18."

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