The U.S. Federal Reserve has slashed a key interest rate by the biggest amount in more than 20 years in an emergency bid to head off a U.S. recession and halt a global rout in stocks.
It cut the federal funds rate by three-quarter percentage points to 3.5 percent.
The surprise move was aimed at fears that trouble on financial markets from the US subprime housing crisis was spreading to the broader economy. Interest rate cuts tend to boost stocks.
Speaking at the US Chamber of Commerce, US Treasury Secretary Henry Paulson expressed his confidence over the U.S economy.
He said the economy is resilient and diverse. It has been remarkably robust in recent years and will be so again.
President Bush has called congressional leaders to the White House to discuss an emergency rescue package that would pump about 150 billion US dollars in tax cuts and government spending into the ailing US economy.
The unusual emergency interest rate cut gave Wall Street a partial rebound on Tuesday from a sharp early decline.
The Dow Jones industrial average, down 465 points shortly after trading began, bounced around throughout the session before closing with a milder drop of 128 or 1 percent, at 11,971.
