The US Federal announcement on Thursday confirmed the hike in rates it charges banks for emergency loans to 0.75 percent from 0.50 percent, knocking down global stocks and commodity prices and pushing up the U. S. dollar.

Financial markets across the globe reported to experience the heat. Indian markets too ended lower. The Nifty closed 42 points down, while the Sensex ended 136 points lower.

The increase is the first in its kind in lending rates by the U. S. central bank since it squeezed its target for overnight interbank borrowing rates, its main policy lever, to almost zero in December 2008 to combat a deep recession and severe financial crisis.

Fed Chairman Ben Bernanke posted that just last week the central bank is soon expected to seek hiking the discount rate; however, the timing of the move still caught markets off guard. Usually, the discount rate would move in lock-step with the interbank federal funds rate.

The sensitive economic recovery, and the requirement for continued low rates to back it, is an issue that Bernanke is likely to address next week in semiannual testimony to Congress.

Expressing surprise at the panic in the market over Fed's announcement, Pimco's Bill Gross said, "The move was more of an appeasement toward Fed board members worried about inflation and not indicative of a broader change of philosophy regarding monetary policy.