The Senate moved the US economy back from the edge of a “fiscal cliff” on Tuesday, voting to avoid imminent tax hikes and spending cuts in a bipartisan deal that could still face stiff challenges in the House of Representatives, which is controlled by Republicans. In a rare New Year’s session, senators voted 89-8 to raise some taxes on the wealthy while making permanent low tax rates on the middle class that have been in place for a decade.

But the measure did little to rein in huge annual budget deficits that have helped push the US debt to $16.4 trillion.

The agreement came too late for Congress to meet its deadline of New Year’s Eve for passing laws to halt $600 billion in tax hikes and spending cuts which strictly speaking came into force on Tuesday.

“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,” President Barack Obama said.

If agreed by Congress, it would hand Obama a victory by hiking tax rates on households earning over $450,000 a year. In India, the deal helped Sensex hit a 20-month high, closing at 19,581.