The US Federal Reserve has reduced interest rates by a quarter of a percentage point, marking the first cut to rates all year.

Fed Chair Jerome Powell announced the decision at a press conference on Wednesday, US time, following a two-day meeting, with the policy rate now in the 4.00 per cent to 4.25 per cent range.

He also indicated the Reserve will steadily lower borrowing costs for the rest of the year.

"In the near term, risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation for monetary policymakers," Mr Powell said.

"It's really the risks that we're seeing to the labor market that were the focus of today's decision."

Mr Powell said he believes the recent pace of job creation is running below the break-even rate needed to hold

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