"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability," the statement said. "In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 per cent."
According to the Associated Press, this is the first rate cut since December 2008 when the Federal Reserve reduced its rate almost to zero and kept it there until 2015.
"In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 per cent inflation objective. This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments." a statement by the Federal Reserve says.
The central bank's benchmark rate affects many loans for businesses and households.