News

Published: December 14, 2023
Updated: December 14, 2023

Indian Markets poised for Gains: Expectation Soars After FED Holds Rates Steady and Signals 2024 Rate Cuts

In a pivotal announcement, the US Federal Reserve, under the leadership of Chairman Jerome Powell, has maintained interest rates at 5.25-5.50% for the third consecutive meeting. The decision, aligned with market expectations, marks a crucial moment in the central bank's approach to inflation and policy tightening.

Status Quo: Fed Keeps Rates Unchanged:

The Federal Open Market Committee (FOMC) concluded its two-day meeting by opting to leave benchmark interest rates unchanged, standing at 5.25-5.50%. This decision reflects the Fed's cautious stance as it assesses the need for any further policy adjustments amid evolving economic conditions.

Inflation Dynamics: A Central Consideration:

The Fed acknowledged that while inflation has moderated over the past year, it remains elevated. This observation prompts the central bank to carefully evaluate the necessity of additional rate hikes. Powell-led policymakers emphasized their commitment to monitoring economic indicators closely.

Anticipated Shift: Three Projected Rate Cuts in 2024:

In a noteworthy shift, Fed officials signalled the conclusion of policy tightening, projecting three interest rate cuts in 2024. A substantial majority, 17 out of 19 officials, anticipate a lower policy rate by the end of 2024 compared to the present levels. The median projection indicates a decrease of three-quarters of a percentage point from the existing range.

Market Response: Global Rally and Indian Outlook:

Global markets, particularly in Asia and the US, experienced positive momentum following a dovish commentary by Chairman Powell. The Asian markets rallied, and US stocks surged overnight. The Indian stock market is poised for a favorable opening, with Sensex and Nifty 50 expected to start higher after the US Federal Reserve's decision to maintain key interest rates and foresee potential rate cuts in the coming year.

Sensex and Nifty Performance: Numbers Tell the Story:

On the preceding day, the Sensex closed at 69,584.60, recording a marginal increase of 0.05%. Meanwhile, the Nifty 50 concluded at 20,926.35, gaining 0.1%. These figures reflect the market's resilience and stability amidst global economic dynamics.

Market Analyst Insights: Factors Influencing Momentum:

Market analysts anticipate continued positive momentum driven by lower-than-expected inflation, robust 16-month high IIP data, a 7-month low in crude oil prices, and foreign institutional investors' (FIIs) ongoing buying activities.

Navigating Economic Waters:

As the Fed charts a course that includes potential rate cuts, global and domestic markets navigate a complex economic landscape. Investors keenly observe the unfolding dynamics, assessing the impact on stocks and the broader financial ecosystem. The coming days are poised to reveal how markets respond to this crucial juncture in monetary policy.