New Delhi
Economists and investors around the world are keeping an eye on the meeting of the US Federal Reserve (US Fed) today. Based on the indications so far, it is believed that today the US Fed may announce a cut in interest rates. If the US Fed announces a cut in interest rates, then this will be the first time after March 2020 that interest rates will be cut in America. Now speculation is being made about whether this cut in interest rates will be of 25 basis points or 50 basis points. Being the largest economy in the world, the economic movement of America affects the economy of the whole world. This is the reason why the eyes of the whole world are now fixed on the decision of the US Fed.
Market experts believe that the US Fed may announce a rate cut of up to 25 basis points. However, some experts are also saying that there may be a rate cut of up to 50 basis points. Due to the expectation of a rate cut, Wall Street has also seen a bullish trend. So far this month, the S&P 500 index has gained up to 1.57 percent. Similarly, Nasdaq and Dow Jones are also trading with overall gains.
Due to the expectation of reduction in interest rates, there has been a big decline in the yield of two-year government bonds in the US. It was at the level of 4.8 percent in July, which has now come down to 3.6 percent. The yield of 10-year government bonds has also declined. Fed Fund Futures has expressed hope of a reduction of 50 basis points in interest rates. It believes that the Fed Fund Rate will come down to the level of 325 to 350 basis points by March 2025. Currently it is at the level of 525 to 550 basis points. The market is estimating that interest rates may come down by 200 basis points in the next 6 months.
Market expert Prashant Jain says that the Federal Open Market Committee (FOMC), the committee that sets the interest rate of the US Federal Reserve, in its meeting held in June, had predicted that the Fed Fund rate would remain at 4.1 percent by the end of 2025. This seems to indicate that the market has anticipated an even greater reduction in interest rates. Earlier, US Fed Chairman Jerome Powell had also indicated that the focus of the US Federal Reserve is now on supporting the labor market as much as possible instead of controlling inflation. The US Fed expects the unemployment rate in the US to remain at four percent by the end of this year.
Many experts are predicting a 25 basis point cut in interest rates as the US Federal Reserve’s focus shifts towards the labor market. However, renowned economist Nick Timiraos says that the US Federal Reserve has kept all its options open so that the market does not suffer a major shock. This is also being said because ever since the talk of interest rate cuts started, a 50 basis point cut was being predicted. However, now many experts are predicting a 25 basis point cut, which could give a big shock to Wall Street.
