Us in ‘unprecedented’ rate shock

In an unexpected move, the US Federal Reserve has slashed rates to 3.5%...

The Fed cited "a weakening of the economic outlook and increasing downside risks to growth," in justifying its surprise move The move, announced before Wall Street opened for trading, reverberated rapidly around the globe and sparked a bounce back in most European markets, but US shares finished weaker.

The leading Dow Jones Industrial Average closed down 1.06 percent at 11,971.19 points after London's FTSE index ended 2.90 percent higher and the Paris CAC finished 2.07 percent stronger. Analysts said volatility in the trillion-dollar US financial system could persist for some time despite the record cut in borrowing costs. The Dow is down almost 10 percent for the year to date.

A rate cut by Fed holds significant implications for emerging markets such as India. This could mean fresh inflow of capital to India. The investors were expecting a rate cut by the Fed. This is yet another attempt by the US Federal System to boost the global markets.

Last time Fed cut rates as much as 75 basis points was in August 1982, almost 26 years ago.