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“The Fed has decided to put the waiting world out of its misery, and start the taper that most economists believe is justified by the data,” said Rob Carnell, chief international economist at ING. The central bank also emphasised that it would keep interest rates close to zero “well past” the point that the US jobless rate falls below 6.5 per cent – and said it wanted to see inflation heading back up towards its 2 per cent target before the first rate rise. “This is a very dovish ‘taper-lite’, where the Fed has done its utmost to provide an offset with its forward guidance, notably on the inclusion of inflation in the unemployment threshold,” said Alan Ruskin, strategist at Deutsche Bank. The S&P 500 equity index reversed an early decline to rise 1.7 per cent to a record closing high of 1,810. The CBOE Vix index of equity volatility, often called Wall Street’s “fear gauge”, was down more than 14 per cent. The dollar also rallied strongly, pushing above Y104 to its highest level against the yen in more than five years. The euro was down 0.5 per cent at $1.3692 while the dollar index, a gauge of the currency ’s value against a basket of counterparts, was up 0.4 per cent. US government bonds appeared largely unfazed by the Fed’s move, with the yield on the 10-year Treasury up 4 basis points at 2.88 per cent – roughly where it stood before the announcement. The two-year yield was just 1bp higher at 0.33 per cent. But gold gave back an earlier advance to stand $10 lower at $1,219 an ounce. Among industrial commodities , Brent crude settled $1.19 higher at $109.63 a barrel, although copper had a more cautious session. The metal edged back 0.1 per cent in London to $7,270 a tonne. European equities moved higher ahead of the Fed announcement, albeit in relatively subdued trading, with the FTSE Eurofirst 300 climbing 0.9 per cent. In Tokyo, the Nikkei 225 climbed 2 per cent, as the yen came under early pressure from data showing that Japan’s trade deficit had widened in November. “The weak yen is largely to blame for the recent widening of the trade deficit,” said Marcel Thieliant at Capital Economics. “As domestic demand accelerates ahead of the consumption tax hike, the deficit may well widen further in the near-term, but we should see a narrowing once the tax has been raised.” Sterling also provided some interest on the currency markets as it briefly broke back above $1.64 – and gilt prices fell – as expectations for an earlier than expected UK interest rate rise were stoked by robust jobs data. The unemployment rate fell to 7.4 per cent, the lowest since April 2009, raising the chances that it would fall below the Bank of England’s 7 per cent threshold next year. The minutes of the December meeting of the Bank’s Monetary Policy Committee, meanwhile, highlighted concern among members about sterling’s recent robust performance. “The Bank of England continues to stress that while the economy’s improved growth performance is welcome, it is still some way from returning to normality and significant headwinds remain, so interest rates need to remain down at 0.5 per cent for some time to come,” said Howard Archer, chief UK economist at IHS Global Insight. Nevertheless, the pound was up 0.8 per cent against the dollar at $1.6387 – in spite of the US currency’s post Fed announcement rally – while the yield on the 10-year UK gilt rose 5bp to 2.93 per cent. There was also further positive news on the German economy, as the Ifo institute’s business climate index increased to 109.5 this month, the highest reading since April 2012. “Judging by the ‘flash’ purchasing managers’ index released earlier this week, and this Ifo survey, the German economy remains on track to outperform its euro area peers over the near term at least,” said Grant Lewis at Daiwa Capital ­Markets.