Click to play videoNew Delhi: Stock markets across the world have rallied to a major interest rate cut by the US Federal Reserve.
On Tuesday, the Federal Reserve lowered its key federal rates rates by 75 basis points (or 0.75 per cent), slightly lesser than what was expected but significant, nonetheless. This was the latest in the series of steps to hold off recession and increase liquidity. The interest rate now stands at 2.25 per cent.
America's central bank has cut interest rates in a bid to restore confidence to nervous financial markets and boost the ailing economy.
The move was expected but the extent of it a little less so.
Wall street had already anticipated the rate cut but was expecting it to be a full percentage point.
The Fed also said that key downside risks growth to remain. The door is open for further rate cuts if required.
US Treasury Secretary Henry Paulson had admitted earlier on Tuesday that the US economy is facing a "sharp decline".
The Fed has lowered rates six times and by three percentage points since September 2007 in a bid to boost the economy, which is reeling from the credit crisis triggered by a slump in the US housing market.
Despite all these measures, however, US economic activity has dropped sharply with data showing a loss of jobs, a lower factory output and lower consumer spending.
Meanwhile, inflation remains a key concern along with runaway oil prices and the dollar’s recent weakness.
However, on Tuesday, Wall Street did pretty well with their blue chip index adding over 400 points and shocker key earnings by two key financial players Goldman Sachs and Lehman Brothers.
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