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US Fed Meeting LIVE: US Fed Chairman Jerome Powell is scheduled to address the media at 1:00 am IST.
US Federal Reserve Chair Jerome Powell.
US Fed Meeting LIVE: The US Federal Reserve on Thursday cut the key interest rates by another 25 basis points to 4.50-4.75 per cent. The rate cut is in line with the market expectations. It comes less than two months after it reduced the interest rates by a significant 50 basis points, thus kickstarting the rate cut cycle after a gap of four years.
US Fed Chairman Jerome Powell is scheduled to address the media at 1:00 am IST.
“The Committee (FOMC) decided to lower the target range for the federal
funds rate by 1/4 percentage point to 4-1/2 to 4-3/4 per cent,” the US Fed’s Federal Open Market Committee (FOMC) said in the latest November 2024 policy statement.
On the US economy, the FOMC said recent indicators suggest that economic activity has continued to expand at a solid pace.
“Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated,” it added.
The dollar index was trading lower by 0.65 per cent at 104.40 after the US policy, as on 1238 IST. However, Dow Jones was marginally up by 0.01 per cent, while the Nasdaq was trading higher by 1.36 per cent. Gold prices were up by 1.41 per cent in New York.
This is the first US monetary policy after Donald Trump’s return to power as the president of the country. It is significant as the policy comes against the backdrop of Trump’s proposals like 10% tariff on all imports and higher taxes on Chinese goods, among others, that are expected to boost inflation.
The US Federal Reserve in its previous policy in September cut its key Federal Funds rates by a significant 50 basis points (bps) to 4.75-5 per cent, to push economic growth. This rate cut, which had come after a gap of four years, was the first in a series of US Fed rate cuts that might extend into 2026. In its dot plot, the US Fed in September 2024 had projected 2.5 percentage points (pp) interest rate cuts by the end of 2026, including the 0.5-pp reduction announced in September.
The US central bank is committed to supporting maximum employment and returning inflation to its 2 per cent objective.
The US Fed often cuts rates to boost a sluggish economy and a weak job market by encouraging more borrowing and spending. But the economy is growing briskly, and the unemployment rate is a low 4.1 per cent.
The American economy grew at a solid annual rate of just below 3% over the past six months, while consumer spending — fueled by higher-income shoppers — rose strongly in the July-September quarter.
In September, inflation dropped to 2.4%, barely above the Fed’s 2% target and equal to its level in 2018.
When inflation spiked to a four-decade high of 9.1% in June 2022, the Fed proceeded to raise rates 11 times — ultimately sending its key rate to about 5.3%, also the highest in four decades.
US Fed Rate Cut: Impact on Indian Markets?
Even as the Indian equities markets are in a downturn mode, a rate cut is expected to give a signal to investors that the global cues will remain favourable for equities markets amid increased spending.
“Investors are now shifting their attention to the upcoming Fed policy meeting and domestic public outlay, which are anticipated to offer more insight into the future trade path,” said Vinod Nair, head of research, Geojit Financial Services.
