US Fed Rate Cut News: Lower rates from the Fed can bring down borrowing costs for mortgages, auto loans, and credit cards over time, though market forces can also affect those rates.
The dollar fell on Thursday after the Federal Reserve reduced its key interest rate by 25 basis points on Wednesday. This is the third rate cut by the Fed in a row. However, Chair Jerome Powell signalled that it may leave rates unchanged in the coming months. With the latest rate cut, the rate has been reduced to 3.6 per cent, the lowest in nearly three years.
Fed officials “will carefully evaluate the incoming data,” Powell said, adding that the Fed is “well positioned to wait to see how the economy evolves. The chair also said that the Fed’s key rate was close to a level that neither restricts nor stimulates the economy.”
Dollar falls
Investors sold the dollar, which in turn pushed the euro above the key USD 1.17 level and close to a two-month high of USD 1.1705 in early Asia trade on Thursday.
Impact of Fed rate cut
Lower rates from the Fed can bring down borrowing costs for mortgages, auto loans, and credit cards over time, though market forces can also affect those rates.
Following the rate cut, US stocks jumped to the edge of their record. The broad S&P 500 stock index rose 0.7 per cent to close just shy of its all-time high reached in October. The Dow Jones Industrial Average jumped 497 points, or 1 per cent, and the Nasdaq composite rose 0.3 per cent.
Impact on stock markets
Indian benchmark indices, Sensex and Nifty, are expected to open in green on December 11 amid positive global cues. Gift Nifty, an early indicator for the Nifty 50, indicated a positive start as it opened with a gain of 18.5 points at 25,955.50, compared to the previous close of 25,974.
“With global cues supportive and Asian markets in the green, GIFT Nifty hints at a mildly positive start for Indian equities. Despite the volatility of the past two sessions, the market still reflects consolidation after a sharp upmove rather than a reversal,” said Ponmudi R, CEO of Enrich Money
Trump criticises the cut
US President Donald Trump on Wednesday criticised the cut as too small, and said he would have preferred “at least double.” According to reports, President Trump could name a new Fed chair as soon as later this month to replace Powell when his term ends in May.
With agency inputs
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(This article is for informational purposes only and should not be construed as investment, financial, or other advice.)
