In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5% and also lowered its discount rate by the same amount to 1.75%.

The ECB also cut by a half-point to 3.75% as did the Bank of England, taking its rate to 4.5%.

China also joined the effort, cutting its key rate 27 basis points.

The Bank of Japan, with rates at just 0.5%, did not ease but the Fed said the BOJ expressed its strong support for the coordinated policy action.

"Incoming economic data suggests that the pace of economic activity has slowed markedly in recent months," the Fed said in a statement.

"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."

The Fed said that while inflation has been high, recent declines in energy and other commodity prices had tempered inflation risks.

It said the vote to cut U.S. rates was unanimous and that inflation expectations appeared to be diminishing which could help support price stability.

"The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability," the Fed said.

The rate cut comes after massive global turmoil struck various stock markets. The Nikkei average plunged 9.4% on Wednesday, its biggest drop since the 1987 stock market crash, as growing fears of a global recession led investors to wipe $250 billion off the value of Tokyo shares.

The yen climbed to a six-month high against the tumbling U.S. dollar, as investors stampeded away from stocks and risky positions.

The Indonesia Stock Exchange halted trading on Wednesday after the benchmark composite index dropped more than 10%, while Hong Kong’s main stock market index dropped more than 5%.

Moscow’s MICEX stock exchange, where most of Russia’s trading takes place, announced it is shutting until Friday after opening with steep losses. The MICEX index dropped more than 14% in the first half-hour of trading Wednesday.

The RTS exchange, whose index is widely considered the benchmark of Russia’s markets, fell more than 11% in the first 30 minutes and suspended trading until further notice.

Hong Kong’s blue chip Hang Seng index shed 5.2%, and India’s Sensex sank 4.3%. Seoul’s Kospi lost 5.8%, Taiwan’s key index fell 5.8%, and Singapore’s benchmark tumbled 5.5%.

Australia’s benchmark S&P/ASX200 closed down 5%, wiping out gains Tuesday after the country’s central bank cut its key interest rate by a bigger-than-expected 1 percentage point.

In an emergency move, Iceland nationalized Landsbanki, the country’s second largest bank, and closed all of its offices, cutting off banking activity across the nation. "We have been forced to take decisive action to save the country," Prime Minister Geir Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.

A full-blown collapse of Iceland’s financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

Icesave, the online arm of Landsbanki, according to regulators, was likely to file for bankruptcy after it stopped permitting customers to withdraw money from their accounts Tuesday.

Kaupthing, Iceland’s largest bank, saw trading of its shares suspended last week to stop a huge sell-off.

To try to wrest control of the spiraling situation, the government also loaned $680 million to Kaupthing to tide it over and said it was negotiating a $5.4 billion loan from Russia to shore up the nation’s finances.

Banking stocks were among the biggest fallers across European markets, with Credit Suisse AG, BNP Paribas SA and Societe Generale some of the worst hit. However, British banks have fared slightly better after the British government’s announcement that it stands ready to take stakes in British banks and give them fresh capital.

The British Treasury said it would be investing up to $87.5 billion in exchange for preference shares in eight of the county’s largest banks and building societies, after Tuesday’s precipitous collapse in a number of banking stocks, most notably Royal Bank of Scotland and HBOS.

In addition, the British Treasury said it will increase banks’ access to liquidity by doubling the amount available to banks under the Bank of England’s Special Liquidity Scheme to $350 billion. The scheme is designed to facilitate short-term borrowing and help to free up credit markets. The Treasury also announced that it will also set up a special company to provide up to $437.5 billion in loan guarantees to banks and building societies. (Tire Review/Akron)