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Colin Powell, one of America's most respected Republicans, today endorsed Barack Obama in his presidential bid, declaring him a "transformational figure" and delivering a stinging rebuff to John McCain, a man he has known for 25 years.

The former Republican Secretary of State, who considered his own bid to become America's first black president in the 1990s, said his decision was not due to race but because Mr Obama had met the standard to be an "exceptional president".

The move comes as the Obama campaign announced that he raised a staggering $150 million last month, shattering his previous fundraising record on $66 million in August. The campaign claimed 632,000 new donors, for a total of 3.1 million to date, with the average contribution being $86.

General Powell, he former chairman of the Joint Chiefs of Staff, who oversaw victory in the first Gulf War and was National Security Adviser to the first President Bush, also made clear that his decision to back the Democrat was as much motivated by unhappiness with Mr McCain, the campaign he has run and his choice of Sarah Palin to be his running mate.

The 71-year-old, an avowed moderate once considered a possible running mate for Mr McCain, said flatly that Mrs Palin, the Governor of Alaska, was not qualified because she is not ready to be president - the primary issue in the selection of a running mate. He decried what he called the "rightward shift" of the Republican Party - he cited Mrs Palin's selection as an example of this - and criticised Mr McCain's "unsure" response to the economic crisis.

"Almost every day he had a different approach to the problems we were having," General Powell told NBC's Meet the Press.

Endorsements rarely have a pivotal impact in presidential politics, but General Powell's strong backing for the Democrat could play a significant role in persuading some undecided swing voters - who will likely decide the election - that Mr Obama is ready to be Commander-in-Chief, his major vulnerability.

It also ensures that, for the next 24 hours, news of the endorsement will dominate media coverage, losing Mr McCain one more day to change the dynamic of the race with just over two weeks until Election Day.

General Powell said he had only come to his decision in recent weeks after asking himself "which is the president we need now - which is the individual that serves the needs of the nation for the next period of time?"

Referring to Mr Obama, he went on: "And I come to the conclusion that because of his ability to inspire, because of the inclusive nature of his campaign, because he is reaching out all across America, because of who he is and his rhetorical abilities — and you have to take that into account — as well as his substance, he has both style and substance, he has met the standard of being a successful president, being an exceptional president."

He added: "I think he is a transformational figure. He is a new generation coming...onto the world stage and on the American stage. And for that reason, I'll be voting for Senator Barack Obama." He said the Democratic candidate could "not only electrify our country but electrify our world." He said he would not campaign for Mr Obama.

Mr McCain, who has repeatedly said that he would have General Powell in his cabinet if elected, played down the endorsement. "It doesn't come as a surprise," the Republican said. "I've always admired and respected General Powell. We're longtime friends...I will continue to respect and admire General Colin Powell.

The Republican nominee said he had been backed by four other former Republican Secretaries of State, and over 200 retired generals and admirals.

General Powell criticised Mr McCain for invoking the Vietnam-era domestic terrorist William Ayers as an Obama associate. Mr Ayers, unrepentant over his role in the bombings of government buildings, is now a university professor in Chicago. He and Mr Obama once worked on the boards of two local charities. In 1995, when the Democrat first ran for Illinois state senate, Mr Ayers hosted a political gathering for him at his home.

"They're trying to connect him to some kind of terrorist feelings, and I think that's inappropriate," General Powell said. "Now I understand what politics is all about — I know how you can go after one another. And that's good. But I think this goes too far. And I think it has made the McCain campaign look a little narrow. It's not what the American people are looking for. And I look at these kinds of approaches to the campaign, and they trouble me."

General Powell said he had "heard senior members of my own party drop the suggestion [that Obama's] a Muslim and might be associated with terrorists."

He added: "This is not the way we should be doing it in America. I feel strongly about this particular point. We have got to stop polarising ourselves in this way. And John McCain is as non-discriminatory as anyone I know. But I'm troubled about the fact that within the party, we have these kinds of expressions."

General Powell said a big job of the new president will be “conveying a new image of American leadership, a new image of America’s role in the world. I think what the president has to do is to start using the power of the Oval Office and the power of his personality to convince the American people and to convince the world that America is solid, America is going to move forward...restoring a sense of purpose."

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