The US central bank has cut interest rates by more than expected in its first reduction in over four years.

The Federal Reserve said it would lower the target for its key lending rate by 0.5 percentage points, to the range of 4.75%-5%.

The widely expected cut is bigger than many analysts had predicted just a week ago, and comes as officials have noted increasing concern about rising unemployment rates.

The move will bring relief to borrowers across the US, who have been contending with interest rates hovering at the highest levels in more than two decades.

Officials signalled that further cuts were likely to follow before the end of the year.

The Fed raised interest rates sharply in 2022, aiming to cool the economy and stabilise prices, which were then surging at the fastest pace since the 1980s.

But officials have gained confidence that inflation, the rate at which prices rise, is now headed back toward their 2% target.

Last month, the head of the bank, Jerome Powell, set the stage for the cut, saying “the time had come” for a policy adjustment.

The Fed’s moves follow cuts by other central banks, including those in Europe, the UK, and Canada.

But ahead of the meeting there was unusual uncertainty about how big a reduction officials would approve.

Some analysts had called for a bigger cut, arguing that the Fed should act aggressively to head off any further economic slowdown and pointing to a significant rise in unemployment since last year.

But others said the bank could afford to move more cautiously, noting that growth has remained resilient.