The US central bank has lowered interest rates for the first time in more than four years with a larger than usual cut.
The Federal Reserve reduced the target for its key lending rate by 0.5 percentage points, to the range of 4.75%-5%.
Jerome Powell, the head of the bank, said the move was “strong” but that it was needed as price rises ease and job market concerns grow.
It will be a relief to US borrowers, who have been dealing with the highest interest rates in more than two decades.
Wednesday’s cut was larger than many analysts had predicted just a week ago, and the bank’s forecast signalled that rates could fall another half percentage point by the end of the year.
Federal Reserve chair Jerome Powell said the aggressive action on Wednesday was intended to make sure that high borrowing costs, put in place to fight inflation, would not end up hurting the US economy.
“The labour market is in a strong place – we want to keep it there,” Mr Powell said. “That’s what we’re doing.”
The move by the Fed follows cuts by other central banks, including those in Europe, the UK, and Canada and a reduction was widely expected.
But ahead of the meeting there was unusual uncertainty about how large a cut officials would approve.
The Fed raised interest rates sharply starting in 2022, aiming to cool the economy and stabilise prices, which were then surging at the fastest pace since the 1980s.