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US Fed Rate Cut: The US Federal Reserve has announced a 50 basis point cut in interest rates. This is the first time after the Corona epidemic that the US Fed has cut interest rates. The US Federal Reserve announced this today on 18 September at 11:30 am (Indian time). With inflation almost under control, economists were expecting that the Fed would 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 were expecting a 25 basis point cut in interest rates.
The US Federal Reserve has cut 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, the whole world is waiting for a cut in interest rates. 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 and the unemployment rate has increased, but it still remains low. Inflation has moved toward the committee's 2 percent target, but it still remains somewhat high.
The committee's goal is to achieve maximum employment and inflation rate of 2 percent over the long term. According to the FOMC statement, taking into account the progress on inflation and risk balance, the committee has decided to reduce the target range for the federal funds rate by 0.50 percentage points to 4.75-5 percent.
Most economists expected a 25 bps cut
Let us tell you that most economists believed that the Federal Reserve would cut 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 cut the interest rate by 50 basis points. Earlier it was being said that a 50 basis point cut 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, all eyes are now on the stance of the Reserve Bank of India (RBI). However, SBI Chairman CS Shetty believes that there is no possibility of a cut in the policy rate due to uncertainty over food inflation.
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 a cut.
What impact will this have on the Indian stock market?
Now the question is what effect the 50 basis point cut by the US Fed can have on the Indian stock market. Experts believe that if this happens, the market can see a strong boom. 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.