Federal Reserve policymakers lowered interest rates by a half-point, citing the potential impact of the "tightening of credit conditions" on housing and the economy.

"Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time," the Fed said in its statement.

While a rate cut was widely expected, there had been debate over whether the Fed would reduce its benchmark interest rate by a quarter-point or by a half-point. Today's cut in its target for the federal funds rate, to 4.75 percent from 5.25 percent, was the first interest rate reduction since June 2003, when the benchmark was cut to 1 percent.

Stocks rallied on the news, with the Dow Jones industrial average jumping 200 points immediately after the Fed's statement.

A rate cut had been seen as all but certain after Ben Bernanke, the Fed chairman, said in a speech last month that the central bank "will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets."

Now that the Fed has fired the big gun in its arsenal, will that be all?

The Fed's statement gave no indication of what it may do next. Indeed, the statement also emphasized the Fed's concern about inflation, saying that despite some data showing improvement in core inflation, it "judges that some inflation risks remain."

"This is one and done," T.J. Marta, fixed income strategist at RBC Capital Markets, told TheStreet.com.  "They said there is no predominant policy concern going forward. So now depending on how the data plays out, they can do as they please."

But traders and others said that there would be more to come.

"I don't think this was a one-and-done as some are interpreting it to be," says Jane L. Caron, chief economic strategist at Dwight Asset Management, according to the Wall Street Journal's MarketBeat blog. "The fact that it was a fully supported move by all F.O.M.C. members suggests to me the board is indeed seriously concerned about downside risk in the economy."

Choosing the larger of two expected rate cuts may stoke criticism that the Fed is in essence bailing out Wall Street, providing a safety net for investors who took on excessive risks. A number of critics have said that the subprime crisis was a product of the Fed's low interest rate policy under Alan Greenspan between 2001 and 2004.

Still, the Fed may feel it cannot take a chance with the economy. There may be further aftershocks felt from the collapse of the subprime mortgage market as housing slumped. That uncertainty has caused a crisis of confidence that still has a hold on the credit markets.

"Developments in financial markets can have broad economic effects felt by many outside the markets," Bernanke noted in his speech last month at the annual Jackson Hole, Wyoming, symposium.

And there have been some recent signs that economic growth is slowing: the August employment report showed a surprising decline in the nation's payrolls, and August retail sales fell 0.4 percent when automotive sales were excluded.

Today, the Fed also cut by a half-point its discount rate, the rate that is charged for banks for loans from Federal Reserve banks. On August 17, the Fed cut the discount rate to 5.75 percent from 6.25 percent in an effort to free up liquidity, but many on Wall Street have said that the Fed needed to do more to make the discount rate window, which is typically seen as a loan of last resort, more attractive.