Wall Street stocks jumped to new highs on Thursday in response to a half point percentage cut in interest rate by the Federal Reserve to bolster the labour market.

The interest cut —the first in four years— generated wide positive feedback in the global markets as S&P 500 notched 1.7 per cent new closing high on Thursday. Likewise Dow Jones, which hit 1.3 per cent and Nasdaq, with 2.5 per cent.

Federal Reserve Governor Christopher Waller admitted that the inflation figures which lowered significantly, informed his decision to slash the interest rate.

“What’s got me a little more concerned is inflation is running softer than I thought,” Mr Waller said on CNBC on Friday.

“That is what put me back a bit to say, wow, inflation is softening much faster than I thought it was going to, and that is what put me over the edge to say, look, I think 50 [basis points] is the right thing to do.” 

Market projections indicated that a steady reduction in inflation would fetch corresponding cuts in interest rates by extra 50 basis points.

Investors such as Mark Hackett, Nationwide chief of investment research, hailed the interest as a step in the right direction to bolster confidence in other investors.

“Investors viewed the aggressive rate cut as a positive catalyst,” Mr Hackett said. “The Fed was able to effectively convince investors that the sizable cut is a proactive measure to sustain economic momentum, rather than a reactive move to stabilize it. The strong market reaction indicates investors have confidence in the Fed and have a ‘glass half full’ mentality.”