1 day Ago By Avijit Ghosal
The US central bank Federal Reserve announced its first rate cut in the past 4 years in a move that could cheer up the markets today. US Federal Reserve announced a 50 basis point cut in the policy interest rate in the wee hours of September 19 (Indian Time) in a move that is expected to cheer up the stock markets globally. The decision to slash rates was the first such move in the past 4 years and broadly in line with Wall Street expectations.
The decision taken after a two-day meeting of the FOMC (Federal Open Market Committee) brought the interest rate down from the 5%-5.50% range to 4.75%-5.
00% range and ended months of will-it-won’t-it moments as the US central bank was caught between inflation, worrisome employment data and the spectre of economic slowdown. Watch the markets Investment strategists have said that a rate cut could trigger a temporary rally in the Indian markets since it could channelise some additional FPI investment into the Indian equity markets. Brokerages such as J M Financial has already said that the communication, media and entertainment sectors can benefit from a rate cut.
On September 18, the Sensex 30 shed 131.43 points (0.16%) to end at 82,948.
23 points, while the Nifty 50 ended at 25,377.55 after going down by 41 points (0.16%).
The markets could rise on Thursday (September 19) as investors were expecting the cut from the Fed. One of the impacts that the US decision can deliver is to trigger investments into emerging markets, of which India is now a key destination. More cuts expected According to reports, economic policymakers in the US now expect another cut by 50 basis points (or half a percentage point) before the end of 2024.
This could be followed up with a 100-basis point cut in 2025 and another reduction by 50 basis points in 2026 to bring down the interest rate in the region of 2.75%-3.00%.
Balancing act The announcement of the 50-basis point cut was inevitable since interest rates were at a 23-year high and job data clearly indicated that the high rates have become an impediment to the process of restoring the economy on the growth path. What finally pushed Jerome Powell to announce the cut was the decline of inflation in the US from 9.1% in the middle of 2022 to 2.
5% in August 2024. Like the boss of any central bank Powell was waiting to arrive at an interest rate that would help generate jobs as well as stop short of stoking inflation. Click for more latest Biz news.
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