Washington: US Federal Reserve Chairman Jerome Powell batted for rate cuts during his speech at Jackson Hole, a retreat attended by central bank governors from across the world as well as key economists. Powell stated that rate cuts were in order since inflation had come under control. The S&P 500 index surged 1 per cent after Powell’s speech.
Speech by Chair Powell on the economic outlook at an economic policy symposium sponsored by @KansasCityFed: https://t.co/oBbmwVLBAz
Watch live: https://t.co/xOEbfu9h6K pic.twitter.com/WxwdMOn7jJ
— Federal Reserve (@federalreserve) August 23, 2024
The Dow Jones index jumped 0.95 per cent while the Nasdaq rose 1.46 per cent after Powell’s announcement. Meanwhile, the dollar index was down 0.56 per cent.
Powell exuded confidence that inflation is on a “sustainable path back to 2 per cent.” The US labour market print presented an unmistakable trend that US markets were cooling. The US Fed has kept key rates unchanged at 5.25-5.5 per cent for multiple cycles. This is the highest policy rate in 23 years. The US Fed last hiked the policy rate in July 2023. A rate cut is expected to ease the cost of borrowing and ease liquidity in the economic system.
How will Indian indices react
Indian indices are likely to track their Wall Street counterparts after the announcement. To be sure, geopolitical tensions remain and all eyes will be on the outcome or impact of Prime Minister Narendra Modi’s visit to Ukraine, in a bid to cool down tensions in the Russia-Ukraine War.
Gold rates may cool down as investors are likely to heave a sigh of relief after the US Fed’s Powell finally gave a green signal for rate cuts. All eyes will be on RBI Governor Shaktikanta Das for his opinion. However, since the RBI MPC does not meet before October 7-9, 2024. To be sure, inflation registered a major decline in July 2024.
Will RBI cut rates?
The RBI may take the US Fed stance and August inflation into consideration before showing its cards. However, the RBI conducted an off-cycle MPC in 2022 after the Russia-Ukraine War to tighten the repo rate. Will the RBI do an encore of that off cycle meeting this year, this time to cut rates? It’s time to wait and watch for outcome of the US FOMC meeting in September.
US Federal Reserve chairman Jerome Powell said it was time for rate cuts since inflation was largely under control. Here’s are Indian markets may react on Monday. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
