European shares were set to rally today after the Federal Reserve delivered a surprise half-point cut in U.S. interest rates yesterday in an aggressive bid to re-ignite the flagging U.S. economic recovery.
"This is an unavowedly good piece of news, which shows that the Fed is absolutely committed to boosting economic confidence. It's going to go down very, very well with stocks," said David Brown, an economist at Bear Stearns in London.
The U.S. central bank cut its key Federal funds rate by 50 basis points to a fresh 40-year low of 1.25%, saying the reduction should help the economy through its "soft spot."
However, U.S. policymakers signalled they were unlikely to ease again in the short term, saying that risks to the economy were balanced between weakness and inflation.
Economists aren't certain that the European Central Bank and the Bank of England will follow the Fed's lead in rate-setting meetings today.
