New York: The US Federal Reserve has cut the interest rate by 0.25 per cent, bringing it to the 3.5 to 3.75 per cent range, as it tried to balance inflation risk with a labour market showing signs of cooling.

Fed Chairman Jerome Powell said after the rate cut announcement on Wednesday (local time), “We are trying to keep inflation under control, but also support the labour market and strong wages, so that people are earning enough money, and feeling economically healthy again.”

Overall, he said, “We have an extraordinary economy.”

Reacting to that sentiment, Wall Street sent the Dow Jones index up by almost 500 points, or 1.05 per cent at close.

The rate set by the Fed is known as the overnight rate, which banks and lending institutions charge for short-term lending to each other, and

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