The Federal Reserve will make all efforts to ensure the US does not fall into a deflation trap, its vice-chairman said Wednesday, as US stocks plunged to their lowest level of the financial crisis. The comments by Don Kohn reinforced expectations that the Fed may cut rates again in December by as much as 50bp from their current 1%. US stocks on Wednesday slid more than 6%, as bank shares plunged and investors fled to government debt, driving the yield on two-year Treasury notes to 1.06%, the lowest since June 2003. Kohn’s remarks came as minutes showed that Fed officials believed the contraction of the US economy would continue into next year and had sharply increased their unemployment forecasts for late 2009 to between 7.1% and 7.6% – almost two percentage points higher than they expected in June. The minutes confirmed the sense that the US economy suffered a financial heart attack in September and October. Adding to deflation concerns on Wednesday was news that consumer prices fell 1% in October, with core inflation down 0.1% – its first decline since late 1982.