InvestorQ : What do I make of the Fed rate cut and what does it mean for Indian markets?
sara Kunju made post

What do I make of the Fed rate cut and what does it mean for Indian markets?

Answer
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1 year ago


The US Fed cut the fed funds rates from the range of 2.25-2.50% to 2.00-2.25%. This 25 bps rate cut was the first rate cut since 2008. Since 2016, the Fed has only been hiking raters so this reverse action is very interesting. It shows there is pressure on growth and the US is willing to again loosen its monetary policy to help boost growth.

For the RBI, this makes the road easy for a rate cut of 25 bps in the August policy. Since the Fed has also taken a dovish stance, it leaves room for future rate cuts too. Like the US, the RBI may also choose to restrict itself to just 25 bps instead of the 50 bps that markets are demanding. Markets are likely to see this is a positive factor from a liquidity perspective.