The Federal Reserve : the central bank of the United States, has cut interest rates for the third consecutive time. It announced a cut of about 25 basis points, or 0.25%, bringing the interest rate down to 4.25%-4.5% from 4.5%-4.75%. Federal Reserve Chairman Jerome Powell made this decision at the Federal Open Market Committee meeting that began on Tuesday.
The interest rate has fallen by 1% in the past four months. Previously, the Federal Reserve had cut interest rates by about 50 basis points, or 0.50%, in September 2024. This was the first time the Federal Reserve had cut interest rates in September in the past four years. It then cut rates by about 25 basis points, or 0.25%, in November 2024. Over the past four months, the US central bank has cut interest rates by about 1%. Following the Federal Reserve’s interest rate cut, pressure has now increased on the RBI. The US stock market fell after the Federal Reserve announced the interest rate cut. Meanwhile, the Indian stock market saw a sharp decline on Thursday, December 19. The BSE Sensex fell 1,153.17 points to 79,029.03 points, and the NSE Nifty also opened lower by 277.70 points at 23,921.15 points.
What are the reasons for the interest rate cut?
– Risk of economic recession: Consumer spending and industrial production have declined in the US in recent months.
– Global uncertainty: Tensions in international trade and other global factors have also influenced this decision.
– Unemployment: The slow pace of improvement in the labor market has prompted the Fed to cut interest rates. Impact on the Indian economy This cut by the Federal Reserve will also have an impact on emerging economies, including India. – There is a possibility of foreign investors returning to the Indian stock market.- Pressure on the rupee is expected to ease. – Indian exporters may benefit from additional demand in the US market.
What will be the Federal Reserve’s future stance? The Federal Reserve has indicated that future decisions will depend on economic data and financial stability. If the economic situation does not improve, there may be further cuts in interest rates. This decision is a significant signal for investors and consumers, as it indicates that policy measures are needed to sustain the US economy. Pressure on RBI to cut interest rates will increase Following the Federal Reserve’s interest rate cut, pressure on the Reserve Bank of India (RBI) to cut interest rates will now increase. The RBI did not change interest rates for the 11th consecutive time in early December. The repo rate remains at 6.5%. It is now believed that the RBI may cut interest rates at the Monetary Policy Committee meeting in February. The RBI has already said that it is keeping an eye on retail inflation. It will keep retail inflation in mind before cutting interest rates.
