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<ul class="summary-list"><li>S&amp;P Global cut its rating for Israel on Thursday as tensions in the Middle East escalate.</li><li>Israel's economy may suffer if there's a broad and drawn-out conflict, S&amp;P said.</li></ul>S&amp;P Global downgraded Israel on Thursday, warning that escalating tensions in the Middle East could affect its ability to repay debt.The ratings agency cut Israel's sovereign credit score from "AA-" to "A+" while maintaining a negative overall outlook."The recent increase in confrontation with Iran heightens already elevated geopolitical risks for Israel. We expect a wider regional conflict will be avoided, but the Israel-Hamas war and the confrontation with Hezbollah appear set to continue throughout 2024," it said in a <a target="_blank" href="https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3155269">statement</a>.S&amp;P forecast that Israel's overall deficit will rise from about 4% to 8% by the end of this year, mostly due to higher defense spending. It projected that net general government debt is likely to peak at 66% in 2026, and any broadening of the conflict in the Middle East could take an even bigger toll on the country's economy."A wider regional conflict, which is not our baseline scenario, could have a further material negative impact on Israel's security situation and, consequently, its economic, fiscal, and balance-of-payments parameters," S&amp;P said.The downgrade — which puts Israel's credit rating on the same level as countries including China, Bermuda and Kuwait — came as senior US officials told multiple outlets that <a target="_blank" href="https://www.businessinsider.com/explosion-heard-in-iran-according-to-state-media-2024-4">Israel had struck Iran</a> overnight. Tel-Aviv is yet to claim formal responsibility for the attack.Another major credit ratings agency, Moody's, downgraded Israel for the first time in February, citing the impact that the ongoing war in Gaza could have on the country's finances.The Israeli shekel fell 0.2% against <a target="_blank" href="https://markets.businessinsider.com/index/us-dollar-index">the US dollar</a> on Friday as markets digested both the downgrade and the reported strike on Iran, according to data from Refinitiv.

Israel downgraded by another big credit ratings agency as Middle East tensions escalate

The Reserve Bank of India (RBI) may begin lowering <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> around October, provided that external factors like weather conditions and international commodity prices do not cause any disruptions, the credit rating agency, Crisil said in its report. The credit rating agency further anticipated that it expects "two rate cuts this fiscal." It said that the decision of the <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC) decision to hold rates in its recent announcement was due to the elevated <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">food inflation</keyword>. The climate conditions such as weather events are frequently changing and they need to be monitored. Going ahead, it anticipated that the macroeconomic environment would be better, creating a background for a rate cut. "The food challenge to a rate cut is expected to ease as agriculture prospects look better than last year. The monsoon has been above normal (7 per cent above the long period average as of August 7), and sowing has picked up across major foodgrains. As agriculture prospects become clearer by September, we expect it to pave the way for a rate cut," the S&amp;P's arm added in its report. In a move reflecting its cautious approach amid ongoing economic uncertainties, the RBI has decided to keep the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5 per cent. The decision to keep the repo rate steady comes amidst persistent concerns about <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword>, which remains above the RBI's target range. The central bank's commitment to bringing inflation down to its 4 per cent target continues to face challenges due to ongoing food inflation and other economic factors. Noting a likely uptick in core inflation, the report added that factors such as international freight costs, geopolitical risks to crude oil prices, and hikes in domestic telecom tariffs could affect this indicator. Anticipating the growth, it added, "The pace of growth of the economy is expected to ease this year, with lower fiscal support as the government pursues <keyword id="20101140" type="General" weightage="20" keywordseo="fiscal-consolidation" source="keywords">fiscal consolidation</keyword>." Announcing the MPC's decision on August 8, RBI Governor Shaktikanta Das expected the real Gross Domestic Product (GDP) growth of 7.2 per cent for the fiscal year 2024-25. Governor Das emphasized that the RBI remains vigilant regarding inflationary pressures and will take necessary actions to maintain price stability while supporting the country's economic recovery. The MPC's decision reflects a balanced approach, aiming to control inflation without stifling growth. The adjustments in repo rate have a direct effect on <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> and job creation. The lower interest rates tend to stimulate economic growth by making borrowing cheaper for businesses.

RBI expected to begin rate cuts in October, with two reductions this fiscal: Crisil

<ul class="summary-list"><li>With the interest rate cut, the Fed declared the beginning of the end of the inflation fight.</li><li>Harris likely won't claim victory and risk fueling Trump's narrative that the cut is partisan.</li></ul>When the <a target="_blank" href="https://www.businessinsider.com/federal-reserve-interest-rate-cuts-mortgage-investment-credit-savings-2024-9">Federal Reserve cut interest rates by 50 basis points yesterday</a>, it signaled the beginning of the end of the fight against inflation. <a target="_blank" class="" href="https://www.businessinsider.com/category/kamala-harris">Vice President Kamala Harris </a>should, in theory, be able to claim that as a win — but economists and political scientists say that the political calculus is a bit more complicated than the economic one.As former President Donald Trump <a target="_blank" href="https://www.businessinsider.com/interest-rate-cut-trump-fed-powell-reaction-independence-history-2024-9">insists that the rate cut was fueled by partisan politics</a>, Harris has to thread the needle with her rhetoric, experts told Business Insider. Celebrate the rate cut and she risks fueling Trump's narrative; ignore the rate cut and she doesn't get to claim a <a target="_blank" href="https://www.businessinsider.com/trump-harris-economy-tech-debate-tariffs-taxes-2024-9">desperately needed economic victory</a>."This is a double edged one for Harris," Mark Blyth, a political economist at Brown University, said. "If Harris leans into this and says, 'We told you it's working. Look, the Fed is doing this," there's a way in which you could imagine that is played back against her. But if she doesn't take credit for it, then she doesn't get any credit for it."President Joe Biden's administration, including Harris, has been careful to respect the independence of the Fed, according to Ernie Tedeschi, the chief economist at the Yale Budget Lab. He suspects that Harris is pleased with the cut, but will be "careful" with her rhetoric to avoid bolstering the idea that it was partisan. Republicans are already pushing on the partisanship idea — yesterday, <a target="_blank" href="https://x.com/haleytalbotcnn/status/1836498513015837007">Speaker Mike Johnson</a> said that "the timing is a little suspect," while acknowledging that the news was good for consumers."On the other hand, Vice President Harris is running to be president of the same economy that the Federal Reserve is managing," Tedeschi told Business Insider. "And so I would not be surprised if she made some parallel observations to what we heard from Powell, which is that inflation has clearly come down from its heights in 2022."Trump, for his part, has indicated that he will not respect the independence of the Fed. In April, the Wall Street Journal reported that members of his team were <a target="_blank" class="" href="https://www.businessinsider.com/trump-interest-rate-decisions-restructure-federal-reserve-jerome-powell-wsj-2024-4">crafting plans to give Trump a say in interest-rate cuts.</a> The former president has since backed away from that stance, but the agency's independence remains a question mark should he win in November.Regardless of his plans, both Blyth and Tedeschi anticipate that Trump will <a target="_blank" href="https://www.businessinsider.com/harris-trump-nabj-interview-economy-policy-2024-9">continue talking about inflation</a> on the campaign trail. Blyth said that Trump is compelling because he talks about inflation in terms of people's lived experience, not opaque economic terms about the rate of change in prices."The reason that Trump has been so successful on the inflation front is because he's talking about how the actual level of prices that people experience isn't going down," he said. To put it simply, voters relate to the fact that eggs cost more than they did two years ago, not the pace at which egg prices are changing.Tedeschi agrees, and said that the way macro economists like himself talk about inflation is divorced from how most Americans think about the phenomenon."You look around the world, and incumbents around the world have been losing elections, and they've been losing elections in large part because of inflation," he said. "It is a valid voter concern and it is a proven electoral strategy worldwide, in lots of different democracies so far in this pandemic. So [Trump] is definitely not going to stop."The American people <a target="_blank" href="https://www.businessinsider.com/interest-rate-cuts-decision-this-week-federal-reserve-powell-inflation-2024-9">won't begin to feel the effects of the rate cute right away</a>. But it could still impact the political environment, even without Harris giving it a ton of air time. Tedeschi said that the technical economic news will show up in an unlikely place: "the vibes.""The combination of declining inflation and the rate cut means that gloomy news coverage about the economy is probably less likely over the next couple of months," Daniel Hayes, a political science professor at George Washington University, told Business Insider. "If that's what happens, people won't be thinking about inflation as much as the election approaches, which is better for the Democrats."With the rate cut, the Fed implicitly gave economists, political commentators, and the media permission to begin talking about the end of inflation, Tedeschi said, meaning that the tone of the conversation will change. He anticipates that Harris will use the rate cut as a "springboard" to <a target="_blank" href="https://www.businessinsider.com/what-us-economy-would-look-like-with-trump-biden-presidency-2024-5">tout her economic plan</a> and continue pointing out how Trump's policies will raise costs for everyday Americans.There's already evidence that Harris is doing just that. When Business Insider asked the Harris campaign for comment on the Fed's decision, they pointed to her press release, in which she acknowledged that the announcement is "welcome news for Americans," but said prices remain too high. After listing some of her economic policies, Harris contrasted her plans with Trump's and said economists believe his agenda will raise inflation.On Thursday Harris began explicitly leaning into the good economic news, at least to an extent. Her <a target="_blank" href="https://x.com/KamalaHQ/status/1836768253432987858">campaign's Twitter account</a> posted about how the S&amp;P 500 and Dow hit an all-time high.But Blyth remains skeptical that the rate cut will have a lasting impact in an election that's been defined by volatility."By three days from now we'll have forgotten about it," he said. "We'll be fighting about something else."

Rate cuts are a double edged sword for Kamala Harris

<ul class="summary-list"><li>Donald Trump commented on the Fed after Wednesday's interest rate cut.</li><li>As a president and a candidate, Trump has continued undermining the Fed's independence.</li></ul>Interest-rate cuts are finally here, and former President Donald Trump isn't happy about it.On Wednesday, the Federal Open Market Committee <a target="_blank" class="" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">announced an interest-rate cut of 50 basis points</a>, the first cut Americans have received in over four years. With the pace of inflation slowing and the job market cooling over the past few months, some experts and Democratic lawmakers have been urging Fed Chair Jerome Powell to cut rates sooner rather than later to give Americans relief from high prices.But Trump feels differently — he <a target="_blank" class="" href="https://www.youtube.com/watch?v=ZlvBFsWoXtw">said</a> during a New York campaign stop on Wednesday that the rate cut "shows the economy is very bad to cut it by that much, assuming they're not just playing politics.""The economy would be very bad, or they're playing politics, one or the other," Trump said. "But it was a big cut."He's argued in the past that the Fed would only cut rates close to the election to aid Democrats, which he reiterated leading up to the central bank's announcement."They'll do the rate cut and all the political stuff tomorrow," Trump said during a Tuesday town hall in Michigan, adding that if he wins the presidential election, "we're going to get interest rates down."Notably, the president has no influence over lowering interest rates — the Federal Reserve is politically independent and is supposed to make monetary policy decisions solely based on its dual mandate of keeping inflation low and employment high.That's something Trump wants to change — The Wall Street Journal reported in April that members of Trump's team were <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-decisions-restructure-federal-reserve-jerome-powell-wsj-2024-4">creating plans to restructure the Fed</a> and allow Trump to have a say in interest-rate decisions. He later walked those comments back, saying in an August <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-19/trump-defends-fed-criticism-weighs-providing-aid-to-home-buyers">interview</a> with Bloomberg that he doesn't need to be "calling the shot, but it does mean that I should have a right to be able to talk about it like anybody else."Senior advisors to Trump told the Journal that those plans were not finalized.Trump has also previously accused the Fed of being political — he <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-cuts-powell-help-democrats-win-elections-inflation-2024-2">said</a> during a Fox interview in February that Powell is "going to do something to probably help the Democrats, I think, if he lowers interest rates."While Powell has not directly responded to Trump's comments, the Fed chair has repeatedly said that the Federal Reserve is an independent entity that makes decisions solely based on data and is not influenced by politics. "Our job is to support the economy on behalf of the American people, and if we get it right, this will benefit the American people significantly," Powell said during the Wednesday press conference. "It's something we all take very, very seriously. We don't put up any other filters. I think if you start doing that, I don't know where you stop."Trump sought to use his presidential power to appoint members to the Fed board who supported his unorthodox views of the central bank. Judy Shelton, a conservative economist who Trump nominated to the Board of Governors in 2019, had previously written that the Fed was "almost a rogue agency" that couldn't be trusted. Even fellow Republicans balked at her nomination, culminating in a 47-50 failed floor vote exacerbated by GOP absences related to COVID-19."In her past statements, Ms. Shelton has called for the Federal Reserve to be less independent of the political branches and has even questioned the need for a central bank," Sen. Susan Collins, a Maine Republican, said of her at the time. "This is not the right signal to send, particularly in the midst of the pandemic."Shelton was one of a series of Trump loyalists whose nominations ran aground. Former 2012 GOP presidential candidate Herman Cain and conservative commentator Stephen Moore both withdrew their respective nominations in the face of opposition. Trump was able to get former Kanas banking commissioner Michelle Bowman and economist Christopher Waller confirmed to the Fed Board.Trump has flip-flopped his views on his most important appointment to the Fed: Powell."He's strong, he's committed, he's smart," Trump said about Powell in 2017 when he nominated him to lead the Fed.In February, the former president said he would not reappoint Powell to lead the Fed. Earlier this summer, Trump told Bloomberg News that he would let Powell serve out his term. Trump's tepid support of Powell underlines just how mercurial he can be when it comes to the central bank."There are few more important positions than this, believe me, in our Government," Trump said in 2017 with Powell looking on.On that point, Trump hasn't wavered.

The Fed's interest-rate cut put Trump even more at odds with the central bank

Indian <keyword id="34984" type="General" weightage="20" keywordseo="airline" source="Orion">airline</keyword> <keyword id="6354887" type="General" weightage="20" keywordseo="industry" source="Orion">industry</keyword> is expecting to prune its <keyword id="9317682" type="General" weightage="20" keywordseo="net-losses" source="Orion">net losses</keyword> to Rs 3,000-5,000 crore in this fiscal from an estimated Rs 17,000-17,500 crore in FY2023 on the back of improved yields and stable cost environment, credit ratings agency <keyword id="6354972" type="General" weightage="20" keywordseo="icra" source="Orion">ICRA</keyword> said on Tuesday. At the same time, ICRA also estimated that domestic air passenger traffic will expand by 8-13 per cent each in FY2024 and FY2025. The <keyword id="164127" type="General" weightage="20" keywordseo="rating-agency" source="Orion">rating agency</keyword> has also maintained its stable outlook on the industry in view of healthy passenger traffic growth, improved yields and a stable cost environment. Building on the fast-paced recovery in FY2023, ICRA at a webinar on Tuesday said it is expecting the domestic air passenger traffic to grow by 8-13 per cent in the ongoing financial year, thereby reaching 150-155 million and surpassing the pre-Covid levels of 141.2 million seen in FY2020. The Industry's net loss (is expected) to shrink to Rs 30-50 billion in FY2024 from an estimated Rs 170-175 billion in FY2023, aided by improved yields and stable cost environment, ICRA said. "The air passenger traffic momentum witnessed in the current fiscal is expected to continue in FY2025, though further expansion in yields from the current levels may be limited. Thus, the industry is estimated to report a similar net loss of ~Rs. 30-50 billion in FY2025 as well," said Suprio Banerjee, Vice President &amp; Sector Head, Corporate Ratings, ICRA Limited. The momentum in air passenger traffic growth is expected to continue in FY2025 as well with a similar estimated year-on-year growth, aided by rising demand for air travel and improving airport infrastructure, ICRA said. During the first eight months of this fiscal, domestic air passenger traffic stood at 100.7 million, witnessing a 17 per cent year-on-year growth, and 5 per cent higher than the pre-Covid levels (8M FY2020) of 95.7 million. Further, the international passenger traffic for Indian carriers, at 23.9 million in FY2023, surpassed the pre-Covid levels, although it trailed the peak levels of 25.9 million in FY2019, ICRA said, adding the same is expected to cross this level in the current fiscal, with an estimated 25-27 million passengers. Moreover, the airlines witnessed better pricing power, as reflected in improved yields and in the spread between revenue per available seat kilometre and cost per available seat kilometre (RASK-CASK) for the airlines, it said. While capacity addition for the industry will continue with the total pending aircraft deliveries of around 1,500, supply chain issues at the aircraft OEMs also mean that the addition could be gradual, ICRA said. Also, a large part of these is towards replacement of old aircraft with new fuel-efficient ones, and with the expected continued growth in passenger traffic, ICRA expects the demand-supply balance to be maintained in the medium-term. Furthermore, a sizeable part of the fleet addition by airlines will also be meant for expanding international operations, it said and added that in FY2023, the share of Indian carriers in international traffic (to and from India) stood at around 42 per cent. This offers adequate growth potential for Indian carriers to gain traction in international traffic over the medium term, the rating agency noted. However, despite a healthy recovery in passenger traffic and improvement in yields, the movement of the latter will remain monitorable amidst elevated ATF prices and depreciation of the Indian Rupee vis-a-vis the US Dollar compared to pre-Covid levels, both of which have a major bearing on the airlines' cost structure, the rating agency noted. The average ATF (aviation turbine fuel) prices stood at Rs 103,189/KL in 9M FY2024, which were 59 per cent higher compared to an average of Rs 64,715/KL during FY2020, albeit a decline of 17 per cent compared to Rs 121,013 /KL in FY2023, it observed. Fuel accounts for 30-40 per cent of the airlines' expenses, while around 35-50 per cent of the airlines' operating expenses 'including aircraft lease payments, fuel expenses, and a significant portion of aircraft and engine maintenance expenses ' are denominated in US dollar terms. "More recently, the Indian aviation industry has been facing significant supply chain issues, resulting in around 20-22 per cent of the total fleet being on the ground currently. "The recent issue related to powder-coating related concerns in engines manufactured by Pratt &amp; Whitney (P&amp;W) is expected to lead to additional aircraft to be grounded by Q4 FY2024 of this fiscal 'amounting to approximately 22-24 per cent of the industry capacity," said Banerjee. This will result in high operating expenses towards cost of grounding, increase in lease rentals due to additional aircraft being taken on lease to offset the grounded capacity, along with increasing lease rates and lower fuel efficiency, which adversely impact the airline's cost structure, and thus overall cash flow generation," he added.

Indian airlines likely to prune losses to Rs 3,000-5,000 cr this fiscal: ICRA

Strong growth and a narrower <keyword id="19942084" type="General" weightage="20" keywordseo="fiscal-deficit" source="keywords">fiscal deficit</keyword> can lead to a <keyword id="20424939" type="General" weightage="20" keywordseo="sovereign-rating" source="keywords">sovereign rating</keyword> upgrade for <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>, a German brokerage said on Monday. The government's commitments on fiscal deficit to 5.1 per cent in FY25 and further down to 4.5 per cent in FY26 "look more credible now", analysts at <keyword id="19960549" type="General" weightage="20" keywordseo="Deutsche-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="Deutsche Bank" meta.hostid="261" meta.entityid="Deutsche Bank">Deutsche Bank</keyword> said, pointing out that the number came in at 5.6 per cent in FY24 as against the budgeted 5.8 per cent. Courtesy the higher than expected dividend announcement by the <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) at Rs 2.1 lakh crore, the fiscal deficit for FY25 can come down to 5 per cent as against the budgeted 5.1 per cent. On growth, the note said it expects real GDP expansion to come at 6.9 per cent in FY25 and go down further to 6.5 per cent in FY26. "Strong growth, lower fiscal deficit opens up room for ratings upgrade," the note said. "A faster-than-anticipated pace of fiscal consolidation could pave the way for a sooner-rather-than-later sovereign rating upgrade for India," the analysts said. It can be noted that global rating agency <keyword id="20043943" type="General" weightage="20" keywordseo="SP" source="keywords" meta.keywordsubtype="org" meta.entityname="S&amp;P" meta.hostid="261" meta.entityid="S&amp;P">S&amp;P</keyword> had last week revised up the outlook on its sovereign rating for India to "positive" from "stable" earlier. On Friday, official data suggested that the economy grew at a faster clip of 8.2 per cent in the March quarter, which takes the FY24 real <keyword id="19972825" type="General" weightage="100" keywordseo="GDP-growth" source="keywords">GDP growth</keyword> to 7.6 per cent. The note said the Indian economy has exhibited "remarkable resilience" despite higher rates for longer, the Russia-Ukraine war and Covid prior to that, though a strong pickup in real GDP growth during FY24 can be also attributed materially to a very low <keyword id="21922336" type="General" weightage="20" keywordseo="GDP-deflator" source="keywords">GDP deflator</keyword>. It explained that nominal GDP growth slowed to 9.6 per cent in FY24, from 14.2 per cent in FY23 and 19 per cent in FY22. But in real terms, GDP growth accelerated to 8.2 per cent in FY24 from 7 per cent in FY23, thanks to a collapse in the GDP deflator to 1.4 per cent in FY24 from 7.6 per cent year-on-year in FY23 and 9.4 per cent in FY22. Deutsche Bank also advised caution on reading the headline GDP numbers, pointing out that while the real GDP grew 8.2 per cent, real GVA (gross value added) growth was 1 percentage point lower at 7.2 per cent.

Strong growth, lower fiscal deficit may lead to India rating upgrade: Deutsche Bank

Kolkata, <keyword id="3658" type="General" weightage="80" keywordseo="india" source="Orion">India</keyword> should be rated at least one or two grades higher than what it is at present by global rating agencies, <keyword id="1241350" type="General" weightage="50" keywordseo="sanjeev-sanyal" source="Orion">Sanjeev Sanyal</keyword>, Member of the <keyword id="109248" type="General" weightage="50" keywordseo="economic-advisory-council" source="Orion">Economic Advisory Council</keyword> to the Prime Minister, said. <keyword id="268371" type="General" weightage="100" keywordseo="sanyal" source="Orion">Sanyal</keyword> said India just about makes it past the investment grade in the ratings of the agencies, which is "utterly absurd". "In terms of sovereign ratings, if India was fairly rated, it should be at least one, if not two grades higher. There is no reason for India to be at the bottom of the investment grade," Sanyal said. He was speaking at the <keyword id="18313943" type="General" weightage="50" keywordseo="careedge-conversations" source="Orion">CareEdge Conversations</keyword> here on Monday on the theme 'India: Reversing the Gaze'. Sanyal said frameworks of the rating agencies should be questioned, and India should realise that those can be replaced with "ease". "Why should we have to abide by rules and norms of the West, which we had no role in framing....just like the several indices where we feature below 100," he added.

India's sovereign ratings by global agencies utterly absurd: Sanjeev Sanyal

<ul class="summary-list"><li>Markets are rebounding after Monday's meltdown triggered by Japan's interest-rate hike.</li><li>The market volatility will challenge the Fed and BOJ's rate-hike decisions going forward.</li></ul>Markets are rebounding after <a target="_blank" class="" href="https://www.businessinsider.com/markets-japan-rate-hike-yen-fx-carry-trade-stock-futures-2024-8">Monday's meltdown,</a> injecting challenges into central banks' interest-rate decisions.In Japan, the benchmark <a target="_blank" class="" href="https://markets.businessinsider.com/index/nikkei_225">Nikkei 225</a> index bounced back spectacularly on Tuesday, gaining as much as 11% in early trade — and regaining nearly all its losses after closing 12.4% lower on Monday.Meanwhile, South Korea's <a target="_blank" class="" href="https://markets.businessinsider.com/index/kospi">Kospi</a> gained as much as 5.6%, and Taiwan's Taiex jumped nearly 5% <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-crash-asia-nikkei-kospi-taiex-asx-recent-lows-2024-8">after marking new lows on Monday.</a><a target="_blank" class="" href="https://markets.businessinsider.com/index/kospi">US stock futures</a> are also higher on Tuesday after <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-crash-picks-up-recession-fears-carry-trade-unwind-2024-8">plunging</a> on Monday.As Kyle Rodda, a senior market analyst at trading platform Capital.com, told Business Insider: "It's wild out there at the moment."The market volatility is due to a mix of factors including poor earnings results from several tech giants and <a target="_blank" class="" href="https://www.businessinsider.com/unemployment-rate-job-growth-july-labor-market-economic-data-2024-7">a weak July payroll report</a>. It's also in part due to the Bank of Japan hiking interest rates to their highest levels in 15 years, sending the Japanese yen up and unraveling a series of global carry trades across regions and time zones.<h2 id="f3577960-8c74-4ddd-afa6-8a4f86b2677c">Central banks are in a bind</h2>The market turmoil has put the BOJ and the US Federal Reserve in tight spots, with analysts and investors questioning the two central banks' timing on interest rate decisions.As it is, the BOJ's rate hike — which sparked the market rout — has put the central bank's move under <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-05/boj-under-fire-for-rate-hike-timing-after-japan-market-meltdown">intense scrutiny and criticism.</a>Some analysts are speculating that the BOJ rate cut was because it was under political pressure to shore up the floundering yen, <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-05/boj-under-fire-for-rate-hike-timing-after-japan-market-meltdown">Bloomberg</a> reported on Monday.As Vishnu Varathan, Mizuho Bank's chief economist of Asia excluding Japan, wrote in a note on Monday, the BOJ is "complicit" in triggering the risk-off trades.Going forward, the BOJ could have a harder time with the timing of its rate hike decisions. It may also struggle to "credibly backtrack on hawkish guidance that has flown out of control," wrote Varathan, referring to the market rout.Japan's finance ministry, the BOJ, and the country's financial regulator are meeting on Tuesday to discuss market volatility and the yen's movement, per <a target="_blank" class="" href="https://www.nikkei.com/article/DGXZQOUA063S00W4A800C2000000/">Nikkei.</a>Japan's Ministry of Finance, Financial Services Agency, and Bank of Japan will host a senior officials' meeting from 3:00 p.m. to discuss international financial markets, the finance ministry said on Tuesday.<h2 id="457d8920-3a77-4681-a191-45c2368a6506">Talks of an emergency rate cut</h2>The market selloff has also made the Fed's rate hike timing harder.Investors were already jittery due to a weak <a target="_blank" class="" href="https://www.businessinsider.com/unemployment-rate-job-growth-july-labor-market-economic-data-2024-7">US July jobs report </a>that came after the <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-likely-september-federal-reserve-holds-steady-july-2024-7">Fed's decision last week</a> to stand pat on rates for the eighth straight time.Now, the market meltdown is throwing a spanner into whether the Fed would be to able to engineer a soft landing for the US economy.Markets now fear that the Fed's "higher for longer" stance on interest rates is on shaky ground and that the central bank is "inadvertently heading for 'too high for too long' policy mistake," wrote Varathan.There are even talks of a Fed <a target="_blank" class="" href="https://www.businessinsider.com/fed-rate-cuts-recession-outlook-economy-job-market-interest-rates-2024-8">emergency rate cut</a> now that's being priced into the market.However, the Fed must strike a "delicate balance to make that distinction between timely and panicked cuts," wrote Varathan.Capital.com's Rodda said talks of a rate cut seem premature as it appears to be stress and volatility in the stock and currency markets."I think the only justification for an emergency meeting is if we see major market dysfunction in funding or treasury markets, which we haven't seen at all, or a total collapse in the labour market, which would probably have to occur because of a major external shock," he said. "Neither has occurred, at least yet."

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