US Fed Rate Cut – It is very likely that the U.S. Federal Reserve will announce a rate drop during their policy meeting as of today, September 18, 2024. The first rate reduction in years, according to economists, is expected to come from a 25 basis point (0.25%) reduction by the Fed. In light of the need to promote economic growth and a slower rate of inflation, this decision was made. In the upcoming months, additional reductions are anticipated as a component of a larger relaxation plan for 2024.
What is the US Fed rate cut Policy?
The Federal Reserve’s decision to reduce the federal funds rate—the interest rate at which banks lend to one another overnight—is known as the “Fed rate cut policy.” This policy lowers the cost of borrowing for both individuals and businesses, which helps to boost the economy. Rate reductions stimulate investment and spending, which can accelerate economic growth, particularly in downturns or recessions. But if demand increases too quickly, it might also result in lower returns on savings and possibly higher inflation.
Which Stocks can be impact after US Fed Rate Cut Policy?
Different stock market sectors will be impacted differently by the Fed’s possible rate-cutting strategy. Rate reductions often boost economic growth by lowering the cost of borrowing, which promotes investment and consumer spending. This is how some industries and stocks may be impacted:
1. Financial Stocks – Impacts on banks such as JPMorgan Chase (JPM) might be conflicting. Lower interest rates tend to increase loan demand while decreasing net interest income, which could balance losses. Net interest income is the difference between the interest banks earn and what they pay out.
2. Technology stocks – Growth-oriented businesses stand to gain a great deal, especially those in the technology industry. Reduced rates lower capital costs, which facilitates these businesses’ ability to fund growth. Given their past success with rate reductions, stocks like Apple and Microsoft may do well.
3. Consumer Goods & Housing stocks – Lower interest rates make mortgages and loans more accessible, which will increase demand for homes and consumer goods, which could benefit the real estate and consumer goods sectors.
All things considered, the Fed’s decision to lower interest rates today may lead to gains in these industries; however, the precise effect
will rely on the size of the drop and market expectations.
Will the upward momentum in the US stock market persist following the US Fed rate cut?
In advance of the anticipated rate decrease by the Fed, Dow futures and Nasdaq futures are showing a favorable response as of today, September 18, 2024. Investors are factoring in a probable 25 basis point reduction, which could spur growth stock gains, especially in the IT industry, as companies that depend on funding benefit from lower borrowing costs. However, because of possibly declining loan profit margins, financial equities might perform differently.
Will the upward momentum in the Indian stock market persist following the US Fed rate cut?
Indian markets are predicted to benefit from today’s possible rate cut by the Federal Reserve. A decrease in the Federal Reserve’s interest rate usually results in a rise in foreign investment in developing economies such as India, since lower interest rates make holding US dollars less appealing. This promotes investors to look for better profits abroad, increasing market liquidity in places like India.
India’s major industries that could profit are real estate, finance, and IT. Because financing rates are lower, IT businesses like Infosys and TCS may benefit as their American clients boost spending. Improvements in the banking industry may also be seen as reduced interest rates boost bank valuations and increase liquidity, which is good news for stocks like HDFC Bank.
Even while the rate decrease has already been fully priced in, traders are closely monitoring global trends, and a dovish Fed statement might lead to further increases in the stock market, especially in sectors where interest rates are sensitive.
