While Fed policy makers now have less room to maneuver on interest rates if the economy deteriorates further, investors had been hoping for the relatively aggressive cut as a sign of vigilance among American central bankers seeking to restore the free flow of credit. The move brought the rate down to near the lows reached in 2003 and 2004.

China, which has said it would not fall victim to the crisis, also cut its interest rate to 6.66 percent from 6.93. The People's Bank of China said it would take effect on Thursday. Norway also cut rates on Wednesday, Japan may cut on Friday and the European Central Bank and Britain are expected to add to the easing next week as authorities remain fearful that the worst financial crisis in 80 years will cause a long global recession.