The US Federal Reserve has decided to keep its key policy rate unchanged at 5.25%-5.50%, taking into account the cooling inflation and the strength of the economy. However, the central bank has dashed hopes for a rate cut in March, causing disappointment among investors.
The decision comes amidst a backdrop of mixed performance in Asian markets and a decline in US stocks overnight. The Federal Reserve’s stance on interest rates has had a significant impact on global markets.
In India, the benchmark indices witnessed healthy gains ahead of the Interim Budget 2024. The Sensex rose by 0.86%, closing at 71,752.11 points, while the Nifty 50 settled 0.95% higher at 21,725.70 points. The focus now shifts to the budget announcements and their potential impact on the market.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services Ltd., expects minimal proposals in the Interim Budget due to India’s strong economic growth in recent years. Fiscal consolidation and a fiscal deficit target of around 5.2% – 5.4% of GDP are anticipated. However, volatility may be experienced due to the colliding factors of the US Fed outcome and the budget announcements.
Meanwhile, Asian markets have been trading mixed, with Japan’s Nikkei 225 declining 0.5% and South Korea’s Kospi gaining 0.5%. The decision of the US Federal Reserve to hold rates steady has created uncertainty in these markets.
In the US, the stock market indices experienced significant losses following the Federal Reserve’s announcement. The S&P 500 recorded its steepest daily decline since September 21. The Dow Jones Industrial Average declined by 0.82%, the S&P 500 dropped by 1.61%, and the Nasdaq Composite ended lower by 2.23%.
Key stocks such as Alphabet and New York Community Bancorp faced notable declines. Alphabet shares plunged by 7.5% after disappointing fourth-quarter earnings, while New York Community Bancorp shares tanked by 37.7% due to a surprise loss and dividend reduction.
Overall, the decision by the US Federal Reserve to keep interest rates unchanged has disappointed investors and raised uncertainties in the global market. The focus now shifts to the impact of the Interim Budget 2024 on the Indian market and the potential for further market volatility.
FAQ Section:
Q: What is the key policy rate of the US Federal Reserve?
A: The key policy rate of the US Federal Reserve is currently unchanged at 5.25%-5.50%.
Q: Why did the US Federal Reserve decide not to cut rates in March?
A: The US Federal Reserve took into account the cooling inflation and the strength of the economy in its decision not to cut rates in March.
Q: What impact does the Federal Reserve’s stance on interest rates have on global markets?
A: The Federal Reserve’s stance on interest rates has a significant impact on global markets.
Q: How did the Indian benchmark indices perform ahead of the Interim Budget 2024?
A: The Sensex rose by 0.86% and closed at 71,752.11 points, while the Nifty 50 settled 0.95% higher at 21,725.70 points.
Q: What is anticipated in the Interim Budget with regards to fiscal consolidation and fiscal deficit target?
A: Fiscal consolidation and a fiscal deficit target of around 5.2% – 5.4% of GDP are anticipated in the Interim Budget.
Q: How have Asian markets been trading?
A: Asian markets have been trading mixed, with Japan’s Nikkei 225 declining 0.5% and South Korea’s Kospi gaining 0.5%.
Q: What happened to US stock market indices following the Federal Reserve’s announcement?
A: US stock market indices experienced significant losses following the Federal Reserve’s announcement.
Q: Which key stocks faced notable declines in the US market?
A: Alphabet shares plunged by 7.5% and New York Community Bancorp shares tanked by 37.7%.
Q: What is the focus now after the US Federal Reserve’s decision?
A: The focus now shifts to the impact of the Interim Budget 2024 on the Indian market and the potential for further market volatility.
Definitions:
– Key policy rate: The interest rate at which the central bank lends money to commercial banks, which then impacts borrowing rates for businesses and consumers.
– Benchmark indices: Stock market indices that represent the overall performance of a specific market or sector.
– Fiscal consolidation: The process of stabilizing government finances, typically through reducing spending and/or increasing revenue, to reduce the fiscal deficit.
– Fiscal deficit: The difference between a government’s spending and its revenue. A higher fiscal deficit indicates increased borrowing or decreased revenue.
– Volatility: The degree of variation in the price or value of a financial instrument, market, or economy over time.
Suggested related links:
– Federal Reserve
– The Economic Times
– Nikkei Asian Review
– NYSE – New York Stock Exchange