Us Fed Rate Cut-Stock Market Crash Or Rally

Us Fed Rate Cut - Stock Market Crash or Rally

On September 18, U.S. Federal Reserve Chairman Jerome Powell is expected to make a significant decision regarding interest rates, which has been eagerly anticipated. Us Fed Rate Cut , Stock Market Crash or Rally impact of this decision. If he decides to increase or maintain the interest rate, it could lead to a market downturn. Conversely, if he reduces the interest rate, the markets are likely to respond positively and may reach new heights.

The announcement will held to impact Stock Market Crash or Rally

The announcement will take effect on September 18, according to U.S. time, but its impact of Stock Market Crash or Rally will be seen in the Indian stock market on September 19. The biggest question in the stock market right now is whether interest rates will be cut or not, and this could have the greatest effect on the stock market. A few weeks ago, Jerome Powell mentioned that the time has come to adjust policies and lower interest rates. He stated, "The direction is clear, but when and by how much the interest rate will be reduced will depend on upcoming data, economic outlook, and the balance of risks.

Impact of Economic Data on Interest Rate Decisions and Market Performance:

The timing and extent of any interest rate cuts will depend on future data and the evolving economic outlook. Since the announcement, the stock market has seen a surge and reached all-time highs due to increased expectations of interest rate cuts. However, it is also important to note that any changes to interest rates will be entirely dependent on forthcoming data. This point was raised three weeks ago, and relevant data has now been released. If the data is negative, there could be delays in cutting interest rates, which might lead to a significant market decline.

U.S. GDP Growth and Its Impact on Us Fed Rate Cut-Stock Market Crash or Rally

The first piece of data is the U.S. GDP growth rate, which has come in better than expected. In the second quarter of 2024, real GDP grew at an annual rate of 3%, compared to an expected 2.8%. In the first quarter, GDP growth was only 1.4%. The main reason for this improved growth is increased consumer spending. With such strong GDP growth, raising interest rates is not a question, but decisions will not be based solely on GDP, and many other factors will also be considered.

This explains why changes in interest rates affect the stock market. Large companies often run their operations by taking out loans. When interest rates are increased, these companies have to pay higher EMIs, which reduces their profits. A decrease in profits negatively impacts the stock market. Conversely, when interest rates are lowered, companies pay less in EMIs, which boosts their profits and positively affects the stock market.

Events in the U.S. stock market have a global impact. If interest rates are reduced in the U.S., it could also affect India. There might be a potential interest rate cut in India during the next RBI meeting. Additionally, Jerome Powell has already stated that the time has come to lower interest rates.

U.S. Employment Data Signals Economic Stability Amid GDP Growth

GDP is growing well, but there is still a lot of data to be reviewed.

The third piece of data is the U.S. job data, which is released monthly. The August data, released on September 6, shows that for the first time in five months, the U.S. unemployment rate has decreased from 4.2% to 4.1%. Last month, 142,000 people in the U.S. found jobs, indicating that both employers and employees are increasing in number. This suggests a stable economy. If the economy is stable, the likelihood of interest rate hikes decreases. Interest rates might be cut, but this will depend on future data.

Impact of U.S. CPI Data on Inflation, Us Fed Rate Cut-Stock Market Crash or Rally

The U.S. Consumer Price Index (CPI) data indicates whether inflation is rising or falling. An increase in CPI means that the prices of goods and services are rising, leading to higher inflation. Conversely, a decrease in CPI indicates that inflation is decreasing. For August, the core consumer price index in the U.S. rose slightly, which is negative, but overall inflation is the most controlled since 2021, standing at 2.5%.

This means that the likelihood of interest rate hikes in the U.S. is low. This data, released on September 11, had an impact on the Indian market, which was observed on September 12. Due to the lower inflation, it is a time for considering interest rate cuts, so an increase in rates seems unlikely. As a result, the Nifty Index rose by 470 points on September 12, reaching its all-time high.

Impact of Producer Price Index (PPI) on Future Interest Rate Cuts

The decision on future interest rate cuts will depend on the Producer Price Index (PPI) data. This data, scheduled to be released on September 12, has now come out. If the PPI increases, it means that the production costs of goods and services have risen, leading to higher selling prices and increased inflation. This time, the PPI rose by 0.2%, which was expected. Therefore, this data is unlikely to have a significant impact on the interest rate decisions.

European Central Bank Reduces Interest Rates Amidst Falling Inflation, U.S. Fed Response Anticipated

On September 11, the European Central Bank's interest rate data was released, with President Christine Lagarde announcing a reduction of interest rates by 25 basis points to 3.5%. This decision was made in response to decreasing inflation in Europe. Based on this, it is anticipated that the U.S. Federal Reserve might also lower interest rates. However, after the 25 basis point cut in Europe, the market had been expecting a 50 basis point reduction. Therefore, if the U.S. Fed only cuts by 25 basis points, there is less likelihood of a significant market rally.

The U.S. report is expected on September 18, and its impact will be observed in the Indian stock market on September 19. The article advises exercising caution when trading on September 19 and taking calculated risks when holding overnight positions on September 18.

Conclusion:

For Us Fed Rate Cut - Stock Market Crash or Rally . Jerome Powell's upcoming interest rate decision on September 18 will have significant repercussions for both U.S. and global stock markets. The recent U.S. GDP growth and unemployment figures suggest a robust economy, but inflation data and other economic indicators will play a crucial role in determining the Federal Reserve's actions. While lower interest rates could boost market performance, any unexpected changes or delays might lead to a market downturn. Investors should remain cautious, particularly in the Indian market, where the effects will be felt on September 19.

So, I believe I’ve given you all the information. I hope you gain some information’s. If you did, don’t forget to like and share it. Stay tuned to our blog for regular updates and insights.

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