The Federal Reserve has slashed America's benchmark interest rate for the first time in 11 years, but US President Donald Trump is not impressed.

Key points: Wall Street tumbled after the Federal Reserve cut US interest rates

Wall Street tumbled after the Federal Reserve cut US interest rates It was the first rate cut since December 2008

It was the first rate cut since December 2008 This decision was due to US trade wars and a global economic slowdown

Mr Trump, who agitated for a "large" cut earlier this week, was disappointed to learn the Fed had only cut rates by 0.25 percentage points, and it could potentially be a one-off.

"As usual, [Federal Reserve chairman Jerome] Powell let us down, but at least he is ending quantitative tightening, which shouldn't have started in the first place — no inflation," Mr Trump tweeted on Wednesday (local time).

"We are winning anyway, but I am certainly not getting much help from the Federal Reserve!"

"What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle."

Stocks tumble, Aussie dollar slips

In the past few weeks, Wall Street had jumped to record highs on strong expectations this interest rate cut would happen.

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However, US markets tumbled after Mr Powell dampened investors' hopes of further rate cuts being announced in the next few months.

The Fed chairman characterised the cut as merely "a mid-cycle adjustment to policy", suggesting it may not be the start of a new trend for economic stimulus.

"Let me be clear — it's not the beginning of a long series of rate cuts," Mr Powell told reporters at a press conference after the Fed released its latest policy statement.

But then he added: "I didn't say it's just one rate cut."

"When you think about rate-cutting cycles, they go on for a long time and the committee is not seeing that.

"You would do that [aggressive rate cutting] if you saw real economic weakness and you thought that the federal funds rate needed to be cut a lot — that's not what we're seeing."

The Dow Jones index experienced its worst trading day since May, dropping 333 points (or 1.2 per cent) to 26,864.

The benchmark S&P 500 fell 1.1 per cent, while the tech-heavy Nasdaq index dropped 1.2 per cent.

Meanwhile, the US greenback jumped to a two-year high as traders realised the Fed was not keen on starting a lengthy rate-cutting cycle.

Market snapshot at 7:05am (AEST): ASX SPI futures -0.4pc at 6,723, ASX 200 (Wednesday's close) -0.5pc at 6,813

ASX SPI futures -0.4pc at 6,723, ASX 200 (Wednesday's close) -0.5pc at 6,813 AUD: 68.43 US cents, 56.3 British pence, 61.77 euro cents, 74.47 Japanese yen, $NZ1.04

AUD: 68.43 US cents, 56.3 British pence, 61.77 euro cents, 74.47 Japanese yen, $NZ1.04 US: Dow Jones -1.1pc at 26,888, S&P 500 -1.1pc at 2,980, Nasdaq -1.2pc at 8,175

US: Dow Jones -1.1pc at 26,888, S&P 500 -1.1pc at 2,980, Nasdaq -1.2pc at 8,175 Europe: FTSE 100 -0.8pc at 7,587, DAX +0.3pc at 12,189, CAC +0.1pc at 5,519, Euro Stoxx 50 +0.1pc at 3,467

Europe: FTSE 100 -0.8pc at 7,587, DAX +0.3pc at 12,189, CAC +0.1pc at 5,519, Euro Stoxx 50 +0.1pc at 3,467 Commodities: Brent crude +0.7pc at $US65.18/barrel, spot gold -1.2pc at $US1,413.55/ounce, iron ore -2pc at $US117.15/tonne

But that led to the Australian dollar falling moderately, down 0.4 per cent to 68.4 US cents.

The Australian share market is likely to open lower — with ASX futures down 0.4 per cent, following the weak lead from US markets.

Why did the Fed cut rates?

The US central bank's interest rate cut was sold as a "pre-emptive" insurance policy against an economic downturn.

The idea is that lowering its key short-term rate could encourage borrowing and spending and energise growth.

With this latest rate cut, the US Federal Funds Rate — which affects many loans for households and businesses — has fallen to a range between 2 and 2.25 per cent.

It is also the first rate cut since December 2008 when, during the depths of the great recession, the Fed slashed its rate to a record low near zero and kept it there until 2015.

Federal Reserve chairman Jerome Powell called this rate cut a 'mid-cycle adjustment'. ( AP: Susan Walsh )

One reason for the rate cut was that the Fed wanted to safeguard against slowing economic growth, particularly in Europe and Asia.

But simmering trade tensions were among the biggest concerns, particularly Mr Trump's trade wars with China and other nations — resulting in hundreds of billions of dollars worth of tariffs being imposed on each other's goods.

The Fed was also concerned the US inflation rate was stuck at weak levels, below its 2 per cent target level.

Furthermore, the Fed said it would stop shrinking its enormous $US3.6 trillion bond portfolio in August, two months earlier than planned — a move intended to avoid raising long-term borrowing rates.

The US central bank had aggressively bought US Treasury and mortgage bonds after the financial crisis to drive down long-term interest rates.

But in the last few years, it has been gradually shrinking its balance sheet as the US economy strengthened.

The Fed's decision to cut rates was approved in an 8-2 majority vote.

It was the first time there had been as many as two dissents since December 2017, which suggests Mr Powell may face opposition if he seeks further rate cuts this year.

Compared with when the Fed previously cut rates more than a decade ago, the economy is now solid by most measures, with consumers spending and unemployment close to a 50-year low.

ABC/wires