US Fed Rate Cut: The US Federal Reserve has announced a cut in interest rates. Markets around the world were watching this. Interest rates have been reduced by 50 basis points. This is the first time after the Corona epidemic that the US Federal Reserve has reduced interest rates
US Fed Rate Cut: The US Federal Reserve has announced a 50 basis point cut in interest rates. This is the first time since the Corona epidemic that the US Fed has cut interest rates. The US Federal Reserve announced this today on September 18 at 11:30 am (Indian time). With inflation almost under control, economists expected the Fed to cut its benchmark rate for the first time in four years. This decision of the US Fed is contrary to the expectations of most economists. Economists had expected a 25 basis point cut in interest rates.
The US Federal Reserve reduced interest rates by 50 basis points to 4.75 percent-5.00 percent. The Fed had kept its policy rate in the range of 5.25 percent-5.50 percent for more than a year to reduce high inflation. At present, interest rate cuts are being awaited all over the world. Talking about the central banks of other countries, interest rates have been cut in the UK, Eurozone, Canada, Mexico, Switzerland and Sweden.
What did the US Federal Reserve say?
The Federal Reserve, led by Chairman Jerome Powell, said in the FOMC statement that economic activity in the US is growing rapidly. The pace of job growth has slowed down and the unemployment rate has increased, but it still remains low. Inflation has moved towards the committee’s target of 2 percent, but it still remains somewhat high.
The committee’s goal is to bring maximum employment and inflation rate to 2 percent in the long run. According to the FOMC statement, keeping in mind the progress on inflation and risk balance, the committee has decided to reduce the target range for the federal funds rate by 0.50 percent to 4.75-5 percent.
Most economists expected a 25 bps reduction
Let us tell you that most economists believed that the Federal Reserve would reduce the interest rate by 25 basis points on September 18. But, Wall Street Journal reporter Nick Timiraos wrote in his report that the central bank could reduce the interest rate by 50 basis points. Earlier it was being said that a reduction of 50 basis points would make it seem that the Federal Reserve is scared.
What will be the stance of RBI?
After the US Federal Reserve cut interest rates, now all eyes will be on the stance of the Reserve Bank of India (RBI). However, SBI Chairman CS Shetty believes that due to uncertainty over food inflation, there is no possibility of a cut in the policy rate.
RBI has not changed the repo rate for 8 times. Earlier, it was last increased to 6.5 percent in February 2023. Earlier during the Corona epidemic, it was reduced from 5.15 percent to 4.40 percent on 27 March 2020 and then to 4 percent on 22 May 2020. After this, the repo rate was changed on 8 June 2022 and it was made 4.90 percent. Then it was made 5.40 percent on 5 August 2022, 5.90 percent on 30 September 2022, 6.25 percent on 7 December 2022 and 6.50 percent on 8 February 2023. It has been stable since then. However, the market is waiting for the cut.
What will be the effect on the Indian stock market?
Now the question is what effect can the 50 basis point cut by the US Fed have on the Indian stock market. Experts believe that if this happens, there can be a strong boom in the market. But a message will also go that a big cut in interest rates is raising concerns about the economy. In such a situation, big action can be seen in the market after the Fed’s decision.
