US markets hit record highs with Federal Reserve interest rate pledge Federal Reserve chairman Ben Bernanke backed more stimulus and pledged to keep interest levels low until unemployment falls. Photograph: Dominick Reuter/Reuters The US stock market was on course to reach a new peak on Thursday after the Federal Reserve pledged to keep interest rates low until unemployment falls nearer to levels last seen before the banking crash. On a day when more Americans than expected claimed unemployment benefits, the central bank said the economy was underperforming and still needed very low rates to stay on course for recovery. In morning trading in New York the Dow Jones climbed to 15423, above its all-time closing high of 15409, reached in May this year. The S&P 500 also climbed above its closing record to reach 1,668, following in the footsteps of the FTSE 100, which finished the day 33 points higher at 6539. The Fed statement was widely interpreted as a hardening of views in its Washington headquarters against pressure from investors and many rightwing politicians in favour raising interest rates. By a majority vote, the Fed open markets committee (FOMC) said: "To support continued progress toward maximum employment and price stability, the committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase programme ends and the economic recovery strengthens." The statement ended a month of uncertainty following a June question-and-answer session when Fed chairman Ben Bernanke had appeared to indicate that monetary easing was due to be scaled back before the end of the year. Bernanke's earlier remarks sent the FTSE 100 into freefall and knocked more than 800 points off the index. Reassuring speeches by Fed staff since then stabilised the atmosphere but failed to reverse the stock market trend significantly. Several policymakers on Capitol Hill have voiced fears that the Fed's quantitative easing (QE) programme, which involves the central bank creating $1tn (£660bn) a year of new money, will encourage investments in developing nation currencies, property and other risky assets. Critics of the Fed's strategy, which has kept interest rates at 0.25% for four years and caused purchase of more than $3tn of government bonds, have also argued the economy is strong enough to withstand a return to "normal" interest rates. Concerns that Tokyo's commitment to pump huge amounts of yen into Japanese economy to beat deflation was unravelling also fuelled panic on the international money markets. But in an apparent co-ordinated move, the Bank of Japan declared on Thursday that its own version of quantitative easing was improving economic growth and would be expanded over the coming months. BOJ governor Haruhiko Kuroda said while overseas economies were weaker than expected that would be offset by robust domestic consumer spending and a pickup in capital expenditure. He was confident consumer and business demand will increase, pushing inflation towards its 2% target in roughly two years. The Shanghai composite index reacted to the FOMC's comments with a 3.2% rise, its strongest gain since January. The index has bounced 12% from its low on June 26, when it hit the lowest point since January 2009. Worries about China's slowing growth rate have also weighed on global sentiment. Investors in China feared a collapse in demand for Chinese exports should the Fed choke of the US recovery with higher interest rates. Last week the new governor of the Bank of England Mark Carney joined European Central Bank chief Mario Draghi in issuing statements that interest rates would remain low despite the early signs of economic recovery. Carney is due to review the BoE's strategy for communicating to the markets how and when it intends to raise rates. It is expected he will persuade the nine-member monetary policy committee to adopt a Fed-style formula for issuing forward guidance, but it is not known if the UK will mimic trying a rise in interest rates to a large fall in unemployment. The Fed said it would keep rates low until unemployment fell to 6.5% from its current 7.6% and possibly longer depending on the level of inflation and growth. But Bernanke failed to persuade all FOMC members to sign the statement. Esther George said she was concerned continued high levels of monetary easing "increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations." She joined hawk James Bullard in voting against the statement. The dissent supported the view that the monthly injection of $85bn into the US economy by the Fed will begin to taper in September, said Capital Economics.