The markets worldwide are waiting with bated breath on what will be a historic policy announcement from the US Federal Reserve, where the central bank is expected to usher in a rate cut cycle.
The announcement will be made at 11:30 pm IST (Indian Standard Time) on Wednesday.
If analysts are to be believed, the US Fed is all but certain to cut interest rates for the first time in more than four years.
However, there is no consensus on the quantum of reduction. Some are predicting a smaller cut of a quarter of a percentage point, while others believe a bigger half-point reduction is in the works.
Senior officials at the US central bank, including Powell, have indicated that a rate cut is coming, as inflation eases toward the bank's long-term target of 2%, and the labour market continues to cool in the post-Covid economy.
If the Fed starts the rate cut cycle, the Reserve Bank of India is also expected to follow suit.
A smaller cut would be a more predictable move, while a bigger cut would do more to boost demand — while also running the risk of reigniting inflation.
By the end 2024, markets are expecting a total reduction of at least 100 basis points in the first rate cut cycle in over 4 years since 2020.
But whether the Fed goes for 25 or 50 bps, the biggest trigger for stock prices to move up or down would be Powell's motivation behind the cut.
Asset classes from stocks, currencies and fixed income could all log swings in the immediate aftermath of the Fed decision.
While easing US interest rates are directionally positive for equities in general, “we should keep in mind interest rates are just one variable in a complex adaptive system that determines the direction of Indian equity markets”, said Anoop Vijaykumar, Investments and Head of Research at Capitalmind.
The announcement will be made at 11:30 pm IST (Indian Standard Time) on Wednesday.
If analysts are to be believed, the US Fed is all but certain to cut interest rates for the first time in more than four years.
However, there is no consensus on the quantum of reduction. Some are predicting a smaller cut of a quarter of a percentage point, while others believe a bigger half-point reduction is in the works.
Senior officials at the US central bank, including Powell, have indicated that a rate cut is coming, as inflation eases toward the bank's long-term target of 2%, and the labour market continues to cool in the post-Covid economy.
If the Fed starts the rate cut cycle, the Reserve Bank of India is also expected to follow suit.
A smaller cut would be a more predictable move, while a bigger cut would do more to boost demand — while also running the risk of reigniting inflation.
By the end 2024, markets are expecting a total reduction of at least 100 basis points in the first rate cut cycle in over 4 years since 2020.
But whether the Fed goes for 25 or 50 bps, the biggest trigger for stock prices to move up or down would be Powell's motivation behind the cut.
Asset classes from stocks, currencies and fixed income could all log swings in the immediate aftermath of the Fed decision.
While easing US interest rates are directionally positive for equities in general, “we should keep in mind interest rates are just one variable in a complex adaptive system that determines the direction of Indian equity markets”, said Anoop Vijaykumar, Investments and Head of Research at Capitalmind.
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