This takes the US interest rates down to just 3.5 per cent in a bid to sidestep an economical recession.
Following yesterday's chaos in the global stockmarkets, the interest rate cut could help calm turbulent waters across the world.
Experts believe this emergency cut to be a sure sign of a 'panicked' Fed - especially as the decision was made outside of the timetabled rate setting OMC meeting.
The last time such a reduction in rates happened was 24 years ago, with the last emergency meeting called just after 9/11.
The Fed is expected to cut rates once more at its scheduled monthly meeting taking place next week.
