In its second interest rate cut since the terrorist attacks of September 11, 2001, the U.S. Federal Reserve cut the key Federal Funds rate from 3% to 2.5%. Other central banks may follow suit within the next few days as weakness continues to spread across the world's major economies.

On January 1, 2001, the rate was 6.5%; today's 2.5% level is the lowest since the Kennedy administration in 1962.

Lowering the rate to 2.5% is a key move, as it also takes the interest rate below the projected inflation rate for 2001/2002.

In its accompanying statement, the Fed said, "The terrorist attacks have significantly heightened uncertainty in an economy that was already weak. Business and household spending as a consequence are being further damped. Nonetheless, the long-term prospects for productivity growth and the economy remain favorable and should become evident once the unusual forces restraining demand abate."