In a surprise move US Federal Reserve slashed its key interest rate to a range between 0% and 0.25% to to prevent the country's ailing economy from slipping further into deep recession.

Federal Reserve also warned in a statement that "the economic outlook has weakened further so the new rate may stay at exceptionally low level for some time".

Analysts said that the key rate is now virtually zero.

It is the lowest Fed fund rate in history since records began in 1954.

Dow Jones Industrial Average closed at 8924, up 359 points or 4.2% after Fed's decision. Nasdaq and S & P 500 closed with more than 5 percent gains.

The Fed's balance sheet has soared to 2.2 trillion U.S. dollars, up from nearly 900 billion dollars in September.