The US Federal Reserve announced Wednesday a 50 basis points cut in its federal funds rate, to 1.5 per cent, in a move coming simultaneously with rate cuts by leading banks in Europe.

The move comes in a bid to ease monetary conditions in the face of the severe financial industry crisis which has hurt the banking sector's liquidity.

In a press statement, the Fed said its Open Market Committe decided on the move "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures."

It said that the action was taken amid incoming economic data suggesting "that the pace of economic activity has slowed markedly in recent months.

"Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit," it said.

The Fed said that while inflation had been high, the open market committee felt that "the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation."

The Fed's action came in an apparent coordinated move with the European Central Bank, which also cut its lead rate by 50 points, the Bank of Canada, the Bank of England, Sveriges Riksbank and the Swiss National Bank.

The Fed also announced it was cutting its discount rate likewise by 50 points to 1.75 per cent.