US rates decision boost for Wall Street
Wall Street rallies after the United States Government restores confidence by taking the unprecedented step of pledging to hold US interest rates near zero for two years.
The Dow Jones Industrial Average in New York closed almost 4 per cent up last night, ending a downward spiral of losses for the US stock market.
The markets rallied after the US Federal Reserve stepped in to promise to maintain extremely low interest rates for the new two years. The US Government hopes the step will be enough to revive a flagging economic recovery.
Markets worldwide have been sliding downwards over the last week because of fears over the US economy and the eurozone debt crisis. Concerns increased when the US lost its AAA credit rating on Friday.
The Fed also said it was considering further action to keep the recovery on track.
Despite the initial confidence boost for investors, analysts warned that there was still plenty of unease about the US economy.
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said the Fed’s statement was “extremely negative in its outlook on the economy”.
He added: “By pegging the extraordinarily low interest rates to a date in the distant future, the Fed has essentially said that they see the current level of weakness lasting far longer than previously expected.”
The FTSE 100 index in London also ended the day on Tuesday almost 2 per cent up after days of losses.