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US Federal Reserve sees 3 rate cuts in 2024: What it means for Indian stock market?
US Federal Reserve signaled it still expects to make three cuts this year sending US markets into a frenzy as traders cheered central bank's affirmation.
The US Federal Reserve voted to keep interest rates at a 23-year high for a fifth consecutive meeting. It also signaled that it still expects to make three cuts this year sending US markets into a frenzy as traders cheered the central bank's affirmation that three cuts are likely despite a rise in monthly inflation in the US. All three major indices on Wall Street closed at new records after Fed unanimously decided to hold its key lending rate between 5.25 per cent and 5.50 per cent. It said that the decision lets policymakers “carefully assess incoming data, the evolving outlook and the balance of risks.”
US monthly inflation playing spoil sport?
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In the first two months of 2024, there has been a small rise in the pace of US monthly inflation which resulted in fears that interest rates will have to remain high to bring prices under control.
"Inflation is still too high," Powell said, adding, “ongoing progress in bringing it down is not assured, and the path forward is uncertain” as this year's inflation data "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward two percent."
What else did US Federal Reserve say?
Fed policymakers also updated their economic forecasts, upgrading US growth outlook for this year to 2.1 per cent, from 1.4 per cent in December. The median projection for interest rates at end-2024 was also left at the midpoint between 4.50 and 4.75.
Powell said that the Fed expects "fairly soon" to start slowing down the pace at which it is selling off assets acquired to help US economy during Covid-19 pandemic, noting, "It's sort of ironic that by going slower, you can get farther. But that's the idea."
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US Federal Reserve decision's impact on Indian markets?
Experts believe that Indian markets have already priced in the anticipated status quo and could pay attention to Federal Reserve's commentary into upcoming market trajectory.
"Our expectation is for India to persist in its underperformance, driven by the outcome of the Fed's policy and muted domestic trends," Vinod Nair, Head of Research, Geojit Financial Services, told Livemint.
