The world has reached the denouement of a long period of will-it-won’t-it drama for the past few months with Jerome Powell, the chairman of the US Federal Reserve widely expected to announce a cut in the key interest rate of the biggest economy in the world on September 18. Powell articulated the decision to finally prune the interest rate earlier this month after job market data made it clear that high interest rates have become an obstacle to economic growth that is needed to pep up employment rates.
This will be the first time in the past 4 years that the US will trim interest rates.
The confidence of the US central bank to cut interest rates seem to have been boosted by the fact that inflation rates have crawled down close to the 2% level, as the Fed boss has said.
23-year-high rate
Currently, the interest rate is at 5.25%-5.50%, which is a 23-year high.
Reports indicated that most experts think that a 25 basis point cut is more likely. However, a 50-point cut cannot be ruled out completely.
Investment strategists have said that a rate cut could trigger a temporary rally in the Indian markets since it could channelise some additional FPI investment into the Indian equity markets.
FOMC meeting to end today
The Federal Open Market Committee (FOMC) that is empowered to take the decision began its two-day deliberations on September 17. It is the sixth meeting of this crucial committee in 2024.
The US presidential elections are scheduled in November and there might be an additional degree of caution due to it. Like any other central bank in the world, the Fed has to maintain a delicate balance between economic growth, employment generation and taming in inflation.
The highest and the lowest
Significantly, between December 2008 and December 2015, the US Fed rate was between 0.00–0.25%, the lowest in history. On the other hand, the highest rate was 20% which was implemented in December 1980 in order to tame inflation that soared to 14.6%.
The question on every lip is by how much will the US Federal Reserve cut interest rates – 25 points or 50? Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
