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US Central Bank Chairman Jerome Powell

As was expected, the US Central Bank Fed Reserve has given relief in loans for the second consecutive time and has reduced the interest rates by 0.25 percent. The Federal Reserve has cut rates for the fifth time since September 2024. During this period, a reduction of 1.50 percent has been seen in interest rates. Now the range of policy interest rates of the US Federal Reserve has come to 3.75-4 percent. In fact, speculations about reduction in interest rates had started since then. When American inflation figures were revealed. The expectation was 3.1 percent. But the inflation figure got stuck at 3 percent. After which it was said that now the Fed will definitely cut interest rates by at least 0.25 percent.

There have been indications from the Fed meeting that another cut can be made in the last meeting of December. This cut can also be of 0.25 percent. There are indications of two to three cuts in the next two years. However, the September policy meeting has indicated only two cuts in the next two years. But more cuts than this can only be expected. When inflation in America comes between 2 percent to 2.5 percent. There is no sign of it coming in the coming months. By the way, America has come very close to a trade deal with China and India. Whose positive impact will be seen in America along with India and China.

After this decision, the pressure on the Reserve Bank of India to cut interest rates has also increased. Even in India the inflation figures are quite low. Inflation figures for October are expected to be much lower. The last MPC meeting of the current year is to be held in December. It is expected that RBI will definitely cut the MPC by 0.25 percent. However, in the August and October meetings, the RBI Governor had postponed the rate cut saying that till now the common people have not got the benefit of the previous cut. In the policy meetings of February, April and June, RBI had given a big relief to the common people by reducing the loan EMIs by a total of 1 percent.

Second consecutive cut

The Federal Reserve on Wednesday (October 29) approved the cut in interest rates for the second consecutive time. The special thing is that this cut has been made at a time when the shutdown has been going on in America since the whole of October. Although its impact is minor, it is visible on the American economy. The central bank's Federal Open Market Committee cut its benchmark overnight lending rate to 3.75%-4% by a 10-2 majority. In addition to the change in rates, the Fed announced it would end cuts to its asset purchases – known as quantitative tightening – starting December 1. Governor Stephen Miron again disagreed, preferring to move quickly with a half-point rate cut by the Fed. St. Louis Fed President Jeffrey Schmid also agreed to disagree with Miran, but for the opposite reason – he called for no further rate cuts by the Fed. The Fed says “available indicators” suggest economic activity is growing at a moderate pace, and reiterates that inflation “has risen since the beginning of the year and remains somewhat high.”

Why did interest rates have to be cut?

Core inflation has remained at 3 percent for three consecutive months, which is about 1 percent above the Fed's 2 percent target, reducing the scope for further easing for dovish members. Nevertheless, rising unemployment figures and labor market weakness have strengthened calls for additional interest rate cuts to support the slowing economy. The ongoing government shutdown since October 1 has delayed the release of key economic data, including official unemployment figures, complicating the Fed's assessment of the economy. Last time in August the unemployment rate was recorded at 4.3 percent.

American stock market boom

After the Fed decision, there is a boom in the American stock market. Dow Jones is trading at 47,854.13 points with a gain of 0.31 percent. Whereas during the trading session, Dow reached a record 52-week high of 48,040.64 points. On the other hand, Nasdaq Composite is also trading at 23,962.66 points with an increase of more than 135 points. Whereas during the trading session Nasdaq had reached a 52-week high of 24,019.99 points. Apart from this, a rise is also being seen in S&P 500. During the trading session, S&P 500 reached a record level of 6,920.34 points. Whereas after the Fed meeting it is trading at 6,905 points with a rise of 0.20 percent.