The announcement will be made at 11:30 pm IST (Indian Standard Time) on Wednesday.
If analysts are to be believed, the US Federal Reserve is almost certain to cut interest rates for the first time in more than four years.
However, there is no consensus on the scale of the reduction. Some predict a smaller cut of a quarter of a percentage point, while others believe a larger reduction of half a percentage point is in the works.
Senior US central bank officials, including Powell, have indicated a rate cut is coming as inflation slows toward the bank’s long-term target of 2% and the labor market continues to cool in the post-Covid economy.
If the Federal Reserve does start the rate-cutting cycle, the Reserve Bank of India is also expected to follow suit. A smaller cut would be a more predictable move, while a larger cut would do more to boost demand, though it would also risk reigniting inflation.
WATCH LIVE TODAY: Press conference with #FOMC Chairman Powell at 2:30 p.m. ET: https://t.co/1uJrua5qsHhttps://t.co/FJa6TbkDMt image.twitter.com/87g5NJITsz
— Federal Reserve (@federalreserve) September 18, 2024
By the end of 2024, markets expect a total reduction of at least 100 basis points in the first rate cut cycle in more than 4 years since 2020.
But whether the Fed opts for 25 or 50 basis points, the biggest trigger for stock prices to rise or fall would be Powell’s motivation behind the cut.
Asset classes from stocks to currencies to fixed income could see swings in the immediate aftermath of the Fed’s decision.
While the US interest rate easing has a positive directional effect for equities overall, “we need to keep in mind that interest rates are just one variable in a complex adaptive system that determines the direction of Indian equity markets,” said Anoop Vijaykumar, Investments and Head of Research at Capitalmind.
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