US interest rates have been reduced for the first time since 2008 amid concerns about the global economy and inflation.
The US central bank announced a 0.25% cut, which the markets expected much, but suggested that it would be ready to lower its borrowing costs further if the economy demanded it.
The cuts lowered the Fed's benchmark overnight lending rate to a target range of 2.00% to 2.25%.
In a statement following a two-day policy meeting, the Fed said it had decided to cut interest rates "in light of the implications of global developments for the economic outlook as well as dampening inflationary pressures."
The Central Bank said it would "continue to monitor" the effect of incoming information on the economy, adding that it "will serve as an appropriate means of sustaining" US economic expansion.
Despite the intention to weaken the currency, the interest rate cut pushed the dollar up to its highest level against the euro in over two years to $ 1[ads1],063.  At the press conference following the announcement, Federal Reserve leader Jerome Powell called the cut a "mid-cycle" policy adjustment, instead of being at the start of an interest rate cut cycle.
Analysts said that US banks and other lenders can resist giving lower prices to consumers on products such as mortgage credit cards.
They also said that the interest rate cut was likely to have a limited effect on the market because it was so expected.
Adrian Lowcock, head of personal investment on the investment platform Willis Owen, said: "The market has priced in two to three cuts in US interest rates, combined with restarted trade negotiations with China, has helped support global markets.
" US GDP also came in slightly higher than expected, suggesting that the world economy is in pretty good shape.
"As such, today's move is unlikely to have much impact on the markets as it was, but priced in.
" Instead, the key to the US Fed is to follow market expectations and make further cuts.
"As has recently been the case, it may turn out that what the Fed says is perhaps more important than the cut itself."
The Fed said the interest rate cut should have the effect of sustaining the expansion of economic activity and a strong labor market, as well as help bring inflation back to its 2% target.
John Bellows, Legg Mason's portfolio manager associated with Western Asset, suggested the interest rate cut signaled that the Fed was moving toward trying to "restore credibility" regarding control of US inflation.
He said: "If the Fed has really shifted its focus to inflation, this may not be the last such thing. " US inflation is unlikely to pick up substantially in the coming months.
"Experience in Europe and Japan highlights the disadvantages of inflation, as [Fed chair Jerome] Powell and [vice chair Richard] Clarida have talked about recently.
" The Fed has a significant amount of work on inflation, and that could very well mean a series cuts over the coming quarters and years.
"One thing seems certain – if the Fed is really serious about regaining inflation credibility, it is quite unlikely to ever raise interest rates in the foreseeable future."
The Fed said in its statement that it continued to regard the US labor market as "strong" and added that household spending had "picked up."
But it noted business spending was "soft" and that inflation compensation measures remain low.
The US markets fell after the Fed announcement at 14 Eastern time (1800 GMT).
Within an hour, the S&P 500 index was down 1.5% and the Dow Jones Industrial Average had dropped 1.6%, to 26,765.
Nasdaq Composite Index fell 1.8%.