The US Federal Reserve has cut the country's main interest rate by half a percentage point.

The rate will fall from 1.5 per cent to 1 per cent just three weeks after the cost of borrowing was cut by a half point in a co-ordinated move with five other central banks, including the Bank of England.

Stock markets rallied ahead of today's expected cut, with the FTSE 100 Index closing 8 per cent higher at 4242 - adding £76 billion to the value of UK blue chips stocks.

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