The Sensex and Nifty started Thursday’s trading session lower with the index falling close to 1.5%. The Indian benchmark indices also plunged to touch lower levels in line with the steep erosion India witnessed on the American markets the previous night. The breakdown came after the US Federal Reserve, as expected, lowered its benchmark interest rate by 25 basis points but revised down its expected rate cuts for next year.
Down Jones Industrial Average dropped over 2.5%, taking its consecutive losses to ten and the longest since 1974. In the meantime, the S&P 500 fell 3% and the Nasdaq Composite, heavily weighted in technology stocks, fell 3.5% after the Fed’s announcement on Wednesday. Other Asia markets were also muted Thursday morning with Japan’s Nikkei 225 losing almost 1.2% and Hong Kong’s Hang Seng shedding over 1%.
Fed Guidance Update
On Wednesday, the US Federal Reserve cut the benchmark rate by 25 basis points to 4.25% – 4.5 %. However, its latest interactive guidance was less inspiring, pointing to two rate cuts only in 2025 down from four expected in September.
This, in his view, was pressed home by a shift in Fed rhetoric during a press conference on Wednesday where Powell stressed a more nuanced approach is now called for by the changing circumstances such as the early part of the incoming Trump administration. “We are in a new phase of the process,” said Powell. “From this point forward it is more appropriate to go slow and begin to monitor the progress made in this front on inflation.”
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