Major equity ETFs jumped after the U.S. central bank cut its benchmark interest rate by half of a percentage point, amid growing concerns that slowing growth had become a bigger worry than inflation.

The $554 billion SPDR S&P 500 ETF Trust (SPY), the world's largest exchange-traded fund, climbed 0.5% after the decision. The second and third largest funds, the Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF (IVV), which both have over $500 billion in AUM and track the S&P 500 index of major stocks, moved in sync with SPY. The tech-focused Invesco QQQ Trust (QQQ) rose 0.7%.

Each of the funds had traded flat-to-lower earlier in the day.

The Federal Reserve sliced the federal funds rate to 475-500 bps, which seemed unlikely just a week ago. But analysts trying to predict the Fed's next move swung heavily toward a larger cut after a mildly encouraging Consumer Price Index reading last week and as economic data has increasingly raised the prospect of a steep recession.

In a statement, the Federal Reserve said that it was confident that inflation was headed "sustainably" toward the bank's goal of an annual 2% increase, but that "the economic outlook is uncertain."

"The Committee is attentive to the risks to both sides of its dual mandate" to keep inflation in check without undercutting the jobs market, the bank said. "In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent," the bank said.

In a press conference after the announcement, Fed Chair Jerome Powell said that the "recalibration" of the bank's "policy stance will help maintain strength of the economy and the labor market and will continue to enable further progress on inflation."

He said that if the economy "evolves as expected, the median participant [in the policy decision] projects that the appropriate level" for interest rates will be "4.4% at the end of this year and 3.4% at the end of 2025." But he also noted that the bank was "not on any preset course," and that it would "continue to make...decisions meeting by meeting."

The Fed last cut the rate in July 2020 to help stimulate an economy reeling from massive shutdowns tied to the Covid-19 pandemic.

As inflation soared to its highest levels in four decades, the central bank adopted a more hawkish stance, raising rates 11 times starting in July 2022 with the last increase 14 months ago.