Fed signals three rate cuts this year; how will it impact equities and gold? Experts weigh in
US Fed keeps benchmark rates steady at 23-year high-mark, projects 3 rate cuts in 2024: 5 key highlights As Mint reported, the policymakers sharply upgraded the US growth outlook for the year 2024 to 2.1 per cent from 1.4 per cent in December but left the headline inflation forecast unchanged. However, they slightly raised the outlook for annual core inflation, which excludes energy and food prices, to 2.6 per cent. Also Read: US Fed leaves key rates unchanged: Full text from Fed's monetary policy statement A rate cut by the Fed is a boost to the equity market as lower interest rates mean cheaper borrowing for businesses which helps them to expand their operations more easily, ultimately leading to increased profitability.
Consequently, stock prices receive a boost as investors perceive a higher potential for returns amidst improved business prospects. Also Read: Fed Officials Still See Three Cuts This Year Moreover, Fed rate cuts tend to boost foreign capital inflows into emerging markets like India. As the outlook of the Indian economy remains strong, rate cuts will boost foreign capital inflow which can lead the market to new highs.
While the indication of three rate cuts is positive for the market, it may not trigger a strong bullish trend, some experts say. The stock markets have been eagerly anticipating a rate cut for nearly a year, which has buoyed market sentiment. Experts pointed out that a considerable portion of the expected rate cuts may have already been factored into current market valuations.
"It is positive for the market. But if you look at the Fed rate and market cycle, the Fed rate went up to 5.25 but the market did not fall. It moved up only.
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