US Federal Reserve Chair Jerome Powell.
– Photo: ani
Expansion
The US central bank Federal Reserve on Wednesday announced a 50 basis point cut in interest rates. The Federal Reserve has cited increased confidence about a reduction in inflation as the main reason for this cut.
Interest rates have been reduced for the first time since March 2020. The effect of the reduction in US interest rates will be seen in the stock markets of the world including India on Thursday. It is believed that this may lead to a boom in the stock market. Before this reduction, the Fed Reserve rates were between 5.25 to 5.5 percent, which were the highest in 23 years. After the announcement of reduction in interest rates, the new interest rates have become between 4.75 to 5 percent. There was also pressure on the US central bank to reduce interest rates amid inflation.
Experts are expecting that there could be another 50 basis points reduction in interest rates this year. The US central bank's policymakers said in a statement announcing the reduction, “The committee is more confident that inflation is moving towards remaining around 2 percent. Along with this, we also expect a balance between our employment and inflation goals.”
This reduction by the US central bank means that the interest rates of government bonds will also come down. In such a situation, people will invest more in the stock markets instead of investing in bonds. Its direct impact will be seen on the Indian and other emerging stock markets because these markets are already successful in attracting investors.
The market did not jump even after the announcement
Generally, a reduction in interest rates leads to a rise in the stock market, but the US stock market fell even after this announcement. It is believed that in view of the US Presidential elections, the Democratic Party had been putting pressure on the Federal Reserve to reduce rates. However, the central bank has denied any political interference in the announcement.