US Fed in focus: In tomorrow’s policy announcement, the FOMC is expected to decrease interest rates by 25 basis points, according to Amit Goel, co-founder and chief global strategist at Pace 360. Goel predicts a brief increase in the Indian market due to a better perception of risk globally.
On Wednesday, September 18, the US Federal Reserve will make its latest interest rate announcement following a two-day meeting of the Federal Open Market Committee (FOMC).
FOMC meeting today live
It is generally anticipated that the rate-setting panel headed by US Fed Chair Jerome Powell will lower the benchmark policy rate for the first time in four years. The FOMC, led by Powell, will start discussing today, Tuesday, September 17, in order to hold its sixth monetary policy meeting of 2024. Powell, who noted that inflation was close to the US Federal Reserve’s two percent target, voiced confidence in the decision to lower interest rates at the current meeting.
Jerome Powell Speech Today Time
Powell stated, “The time has come for policy to adjust,” during the Fed’s annual economic conference held in Jackson Hole, Wyoming. “The path of travel is obvious, and the balance of risks, new data, and changing projections will determine when and how quickly rates are cut.” The FOMC, led by Powell, decided unanimously to maintain the policy rate at the 23-year high of 5.25–5.50 percent at the most recent policy meeting. In an effort to stabilize rising inflation and steadily lower it below the two percent goal range, the US central bank has kept borrowing rates same for twelve consecutive months.
According to D-Street experts, policymakers’ primary focus has been on the labor market, which is expected to dominate policy talks and choices in the coming months. Additionally, before their meetings in November and December, they will have more information to take into account. Additionally, several analysts pointed out that a quarter-point drop might offer a brief lift. However, it is unlikely to have the long-term effect necessary to address all of the issues facing the US economy. Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, a SEBI registered multi-asset PMS and Cat III AIF, predicted that the US Fed would likely announce a 25 basis point rate drop tomorrow ahead of the highly anticipated policy announcement.
Due to an improvement in the perception of global risk, the policy decision may also cause a brief rally in the Indian market. Additionally, it might make the Indian rupee stronger and draw in international investment.
Adapted quotes from the conversation:
1. The US Federal Reserve will drop interest rates on September 18, which will be the central bank’s first policy reduction in four years, as anticipated by the global markets.
What are your main goals for the monetary policy of the US Federal Reserve, and how much of a rate cut do you currently see?
In order to ensure that inflation stays under control, the US Fed will probably place a higher priority on preserving employment stability and economic growth. The labor market has been the main source of concern for policymakers, and in the upcoming months, policy discussions and choices are anticipated to be driven by this issue. Prior to their meetings in November and December, they will also receive additional economic data to take into account, such as jobs reports and inflation statistics.
The Federal Reserve is expected to lower interest rates at its meeting in September for the first time since 2020. Since July 2023, the Federal Open Market Committee (FOMC), which sets Fed policy, has not changed interest rates. How quickly and how far the Fed will lower rates is the main question on the market. We project a rate reduction of 25 basis points (bps).
2.Although the yearly consumer price index (CPI) was at a 43-month low, the most recent US consumer price index (CPI) statistics for August showed a little increase in underlying inflation. Wall Street trimmed betting on a 50 bps rate drop as a result of the data.
What effect do you think the US Fed’s 25 basis point rate drop will have on India’s financial markets?
A 25 basis point reduction may cause Indian markets to briefly rise as a result of an improvement in risk sentiment worldwide. Additionally, it might boost the Indian rupee, which would lower import prices but possibly have a negative impact on exports. Furthermore, this might draw international capital to India, strengthening its stock markets. Nevertheless, the long-term effects will rely on the RBI’s response to global cues and monetary policy. The long-term outcome will depend
The forecast for the world economy and upcoming Fed initiatives will determine the long-term impact.
3. Common issues in the US and Indian economies are food inflation, unemployment, and housing /accommodation costs. Every day, middle-class families bear the brunt of inflation even though overall rates are approaching target.
Do you believe the governments of the US and India have policies in place to deal with these issues?
In order to address these concerns, the governments of the US and India must overcome obstacles. Policies in the US frequently prioritize faster economic growth, which may help the middle class inadvertently. The US offers a number of initiatives, such as targeted subsidies and social safety nets, to help middle-class households lessen the effects of inflation. The monetary policy of the Federal Reserve affects both employment rates and inflation.
The Indian government has put in place initiatives to help lower-income families and stabilize food prices, such as targeted subsidies and social welfare programs. Meeting the demands of middle-class families and controlling inflation efficiently are still difficult tasks, though. The two governments are always developing policies to address these problems.
4. Even though global banks have begun their cycles of rate-cutting, the RBI continues to differ from other central banks in that it pursues an aggressively disinflationary strategy in order to meet the four percent target.
What effect will this have on RBI policy, and when can we expect an Indian rate cut?
The Reserve Bank of India’s emphasis on upholding an inflation target of four percent suggests a prudent strategy. It is probably going to stay in this accommodating position for a while. If inflation stays under control, the RBI may think about loosening its policy stance given the global trend toward rate reductions.
5.The Reserve Bank of India (RBI) stated earlier this year that fluctuating capital flows cause currency swings in emerging market nations like India.
What effect will this year’s outflow of foreign funds have on the financial markets and economic expansion of India?
Outflows of foreign funds have the potential to raise borrowing prices, cause the Indian rupee to weaken, and enhance market volatility. The intensity and length of the discharges determine the impact. This could raise inflationary pressures and increase the cost of imports, which would hinder economic growth. Nonetheless, India might be somewhat resilient to these outside shocks due to its strong internal demand and broad economic base.
6.In 2024, given external factors including geopolitical wars and the US presidential election in November, do you believe stock markets will produce comparable returns to those of the previous year?
By the end of 2024, where do you believe the Nifty 50 and Sensex will be trading?
The US elections and geopolitical tensions are two important outside variables that could cause volatility in the international and Indian markets. Based on how these events are believed to affect investment flows and global economic stability, the markets will respond to them. By the end of 2024, we anticipate that the Nifty will remain in a range, not dropping below 23,500 and maybe rising as high as 26,000. If foreign threats are controlled and the domestic economy is robust, we might see further good performance. Still, Investors should use caution, though, as there may be volatility.
Disclaimer: Investcorpus does not endorse the opinions or suggestions expressed above; rather, they represent the opinions of certain analysts or broking firms. Before making any financial decisions, we suggest investors to consult with qualified specialists.
