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Days after Trump won his way to the White House, becoming the 47th President of the United States, the US Federal Reserve slashed the interest rates by 25 basis points, bringing them within the range of 4.5-4.75%. This is the second time this year that the Fed has lowered the interest rates, after cutting them down by 50 basis points in September 2024. u Fed chair Jerome Powell noted that monetary policy remains tight as inflation remains elevated at 2.4% as of September 2024, slightly above the 2% mark set by the commission. However, the Fed remained optimistic about the current state of the economy. "The Committee seeks to achieve maximum employment and inflation at 2% over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the FOMC (Federal Open Market Committee) noted in its press release. The rate cut was along widely anticipated lines, although experts were wary of the Fed's way ahead, given that Donald Trump has been elected as the US President. In the past, he has, on multiple occasions, expressed his desire to yield greater influence on the Fed, apart from publicly criticizing Powell. However, Powell continued to stand his ground, noting that Trump cannot legally sack him. He believed in keeping the Fed independent, at least until his tenure as governor ends in 2028. He highlighted that even if he is explicitly asked by Trump to quit, he won't do so. <h2>Trump's regime to inch up inflation?</h2> Trump's electoral promises, if translated into policies, could spell disaster for the Fed's effort to curtail inflation. Reportedly, Trump has promised to levy aggressive tariffs against US trading partners, particularly China, and even extend his 2017 tax cuts. This could mean higher levels of the federal deficit, which would push up prices, wages, and hence, inflation, even as the Fed tries to consistently bring it under control. Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities, notes that it wasn't a surprise when the US Fed cut interest rates by 25 basis points (bps) to 4.75%. The Fed had given enough clues, and the market too had anticipated these rate cuts. "However, what was surprising was how the <keyword id="23863852" type="General" weightage="20" keywordseo="US-10-year-bond-yields" source="keywords">US 10-year bond yields</keyword> moved over the last one and a half months, which have been rising relentlessly from 3.6% to almost 4.5% despite the 50 bps cut in the last Fed meeting. It seems that the market is anticipating slower rate cuts going ahead, and maybe there are even chances of inflation rising. The bond yields have cooled off and slipped below the 4.335% mark. This should be bullish for emerging markets like India," he added.

US Fed cuts interest rates by 25 bps, Powell notes Trump's victory to have no impact on policy decisions

Global markets are looking ahead to the US Fed's meeting scheduled for Thursday, November 7, 2024, expecting the Jerome Powell-chaired FOMC (Federal Open Market Committee) to slash interest rates further by 0.25%. In September this year, the Fed surprised the markets by cutting interest rates by a massive 0.5%, for the first time in 4 years. As per the <keyword id="23807624" type="General" weightage="20" keywordseo="CME-Fed-Watch-Tool" source="keywords">CME Fed Watch Tool</keyword>, there is now a 99.5% chance that the Fed will reduce the interest rates by around 25 basis points, bringing it within the range of 4.5% to 4.75%. Only 0.5% believe that the Fed might leave the rates unchanged, within their present range of 4.75% to 5%. As for the Fed's December meeting, scheduled for December 18, per the CME Fed Watch tool, 79.5% believe that interest rates would be in the range of 4.25% to 4.5%. Another 20.4% believe that yields will remain in the range of 4.5% and 4.75%. Only 0.1% see the interest rates staying within their current range of 4.75% to 5% <h2>No major changes anticipated</h2>However, it is unlikely that this quarter-point rate cut would bring about any significant financial changes in the US economy. The Fed is again expected to bring down the interest rates by another 25 basis points in their December meeting. This would imply a total rate cut of about 50 basis points by the end of this year. So, why is the Fed not bringing down interest rates by 50 basis points in one fell swoop this time around? Why wait till December to bring down the rates by another 25 basis points? Experts believe that it could stoke inflation, which has seen a sharp decline in the recent past. A steep slash of borrowing rates could accelerate borrowing activity and inject significant cash into the economy at once, pushing up inflation. Per the Fed's recent projections, a total of 4 rate cuts are anticipated in 2025. On a YoY basis, inflation in the US dipped to 2.4%, close to the Fed's target of 2%. With inflationary pressures reined in, the economy growing at the rate of 2.8% during the third quarter of FY24, and the unemployment rate down to 4.1%, the markets see much merit in bringing interest rates down. This is especially important to boost spending, particularly in sectors such as housing and automobiles, where even a slight tinkering in interest rates can drastically impact the amount and volume of loans taken to own them. Data suggests that during Trump's presidency tenure, i.e., between 2017 and 2021, inflation averaged at a rate of 1.9% a year. During the Biden administration, where Kamala Harris served as VP, the inflation is on track to average around 5% a year. Shrisha Acharya, Vice President, Anand Rathi Global Finance, also notes that the results of the impending US elections, which are likely to be declared tomorrow, will impact the yields and stock markets. "The Trump card, coupled with potential Republican control, could mean higher bond yields due to anticipated increases in deficit spending, inflation risks, and potential tax cuts. This could very well jiggle the confidence in U.S. Treasury bonds and thus start a chain effect that will possibly impact global market stability and lead to short-term volatility. On the other hand, Harris’ rise has been met with a stock market rally glued on expectations of economic stability and controlled inflation, with more predictable fiscal policy likely to help in a soft landing," he explains.

What can you expect from the US Fed meeting later this week? Here's all you need to know

<keyword id="19913110" type="General" weightage="100" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword>, the Governor of <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), on October 26, received award for A+ grade in <keyword id="23702898" type="General" weightage="20" keywordseo="Central-Bank-Report-Cards" source="keywords">Central Bank Report Cards</keyword> 2024, for the second consecutive year. The award, presented by <keyword id="22224722" type="General" weightage="20" keywordseo="Global-Finance" source="keywords" meta.keywordsubtype="org" meta.entityname="Global Finance" meta.hostid="261" meta.entityid="Global Finance">Global Finance</keyword> in <keyword id="21459434" type="General" weightage="20" keywordseo="Washington-D-C-" source="keywords">Washington D.C.</keyword>, USA, recognised RBI Governor's excellent performance and effective leadership in steering India's apex bank through complex economic challenges. In a social media post on X, RBI posted, "Governor @DasShaktikanta received the award for A+ grade in Central Bank Report Cards 2024, for the second consecutive year. Presented by Global Finance at an event held today in Washington DC, USA." The Central Bank Report Cards, published annually by Global Finance since 1994, grade the central bank governors of nearly 100 key countries, territories, and districts, as well as the European Union, the Eastern Caribbean Central Bank, the Bank of Central African States and the Central Bank of West African States. Grades are based on an "A+" to "F" scale for success in areas such as inflation control, economic growth goals, currency stability and interest rate management. "A" represents an excellent performance, down through "F" for outright failure. Along with Das, Denmark's Christian Kettel Thomsen and Switzerland's Thomas Jordan were also accorded an A+ grade. Brazil's Roberto Campos Neto, Chile's Rosanna Costa, Harvesh Kumar Seegolam of Mauritius, Morocco's Abdellatif Jouahri, South Africa's Lesetja Kganyago and Sri Lanka's Nadalal Weerasinghe were amongst those who received the <keyword id="22446364" type="General" weightage="20" keywordseo="A-grade" source="keywords">A grade</keyword>. European Union's Christine Lagarde was given an A- grade. "After a difficult 2023, when geopolitical pressures gathered with tight monetary conditions to create a near-stagflationary environment in the eurozone, the central bank has managed to inch much closer to its 2% target with successive consumer price index (CPI) readings under 3% since February of this year, down to 2.4% in August", Global Finance noted on Lagarde's tenure. <keyword id="19951097" type="General" weightage="20" keywordseo="US-Fed" source="keywords">US Fed</keyword> Chairman Jerome Hayden Powell received an A- grade. Per the Global Finance website, "The Fed has debated in excruciating, and at times confusing, detail throughout this year when and whether to cut its benchmark rate from a 23-year high of 5.5%, a level held since July 2023. This September, the Fed finally turned the monetary ship toward a policy of easing, with a 50-basis point cut, which was at the higher end of forecasts." "Prior to the rate cut, economists agreed that confusion in the markets was a case of bad communication by the Fed, but Powell’s overall handling of policy has been praised. It is difficult to find much fault with the Fed’s approach to policymaking over the past year. The Fed has appropriately changed its tone in response", it continued. However, it also noted that more-substantial easing in the following months will be crucial to avoid a policy mistake and to secure Powell’s legacy. Powell's term as second-time chair of the Fed Reserve ends on May 15, 2026.

Shaktikanta Das receives award for A+ grade in Central Bank Report Cards 2024 in USA

<div type="image" title="In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit" msid="114284206" hostid="261" caption="&amp;lt;p&amp;gt;In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit&amp;lt;/p&amp;gt;"></div> On September 18, 2024, the <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="20" keywordseo="Home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value. </li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value. </li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, <keyword id="173069" type="General" weightage="20" keywordseo="Home-loan-interest" source="Orion">home loan interest</keyword> rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

<ul><li>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>’s <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> meeting is set to begin today.</li><li>The central bank will announce the outcome of the <keyword id="22684891" type="General" weightage="20" keywordseo="MPC-meeting" source="keywords">MPC meeting</keyword> on October 9.</li><li><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has kept the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged for the last nine consecutive meetings.</li></ul>The Reserve Bank of India (RBI) is set to begin its three-day monetary policy meeting on Monday and will run from October 7 to October 9. All eyes are on the outcome, as the central bank has kept the repo rate unchanged for the last nine consecutive meetings. The repo rate, currently at 6.50%, has remained steady since the RBI adopted a cautious stance to balance inflation control and economic growth. The Monetary Policy Committee (MPC), headed by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword>, is expected to weigh key factors like inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation continues to be a challenge, particularly in food and fuel prices, which saw a surge earlier this year. As per the data from the Ministry of Statistics &amp; Programme Implementation, though the All India Consumer Price inflation in August was 3.65%, which is under the RBI target band the food inflation stands at 5.65% and it remains above the RBI's medium-term target of 4%. Despite these inflationary pressures, the RBI has opted for a status quo on the repo rate, primarily to support economic recovery post-pandemic. However, there are rising concerns that external factors, like the rising global crude oil prices and tensions in West Asia, may compel the RBI to reconsider its current stance. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. The newly reconstituted committee consists of the Governor of the Reserve Bank of India as the Chairperson, ex officio; the Deputy Governor of the Reserve Bank of India, in charge of monetary policy--Member, ex officio, and one officer of the Reserve Bank of India, nominated by the Central Board -- Member, ex officio. The new external members included in the MPC are Professor Ram Singh, Director, Delhi School of Economics, University of Delhi, Saugata Bhattacharya, economist; and Dr. Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development. Market participants and analysts are closely monitoring this meeting for any forward guidance on future rate actions. Many believe the central bank will continue its wait-and-watch approach, but a surprise rate hike cannot be entirely ruled out. On September 18, the <keyword id="19901377" type="General" weightage="20" keywordseo="US-Federal-Reserve" source="keywords">US Federal Reserve</keyword> announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. The outcome of the MPC meeting will be announced on October 9 and will set the tone for future monetary policies amid the changing global economic landscape. The Reserve Bank of India (RBI) will commence its three-day monetary policy meeting on Monday, October 7th, and continue until October 9th. The result of this meeting is eagerly anticipated, as the central bank has maintained a steady repo rate for the past nine consecutive meetings. The repo rate has remained at 6.50% since the RBI adopted a cautious approach to balance inflation control and economic growth. The Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, will consider various factors, including inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation remains a challenge, particularly in food and fuel prices, which surged earlier this year. According to data from the Ministry of Statistics &amp; Programme Implementation, All India Consumer Price inflation in August was 3.65%, within the RBI's target band, however, food inflation stands at 5.65%, exceeding the RBI's medium-term target of 4%. Despite inflationary pressures, the RBI has opted to maintain the repo rate to support economic recovery post-pandemic. Nonetheless, rising concerns about external factors, such as increasing global crude oil prices due to tensions in West Asia, may prompt the RBI to reassess its current stance. Earlier this month, the central government appointed three new members to the monetary policy committee. The MPC consists of three members from the RBI and three external members appointed by the Central Government. It is worth noting that on September 18, the US Federal Reserve announced a substantial 50 basis points interest rate cut in its review meeting, reversing its previous stance of holding rates steady for eight consecutive meetings. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/september-auto-sales-automakers-report-a-decline-mahindra-and-mahindra-overtakes-tata-motors/articleshow/113925972.cms">September Auto sales – Automakers report a decline, Mahindra and Mahindra overtakes Tata Motors</a> <a href="https://www.businessinsider.in/business/auto/news/ola-electric-continues-to-lose-market-share-as-bajaj-auto-and-tvs-motor-gain/articleshow/113900252.cms">Ola Electric continues to lose market share as Bajaj Auto and TVS Motor gain</a> <a href="https://www.businessinsider.in/business/telecom/news/airtel-is-using-ai-powered-technology-to-block-spam-calls-and-messages/articleshow/113691942.cms">Airtel is using AI-powered technology to block spam calls and messages</a>

RBI's monetary policy committee meeting begins today, announcement on October 9

For the first time since 202o, the US <keyword id="19904332" type="General" weightage="100" keywordseo="Federal-Reserve" source="keywords" meta.keywordsubtype="org" meta.entityname="Federal Reserve" meta.hostid="261" meta.entityid="Federal Reserve">Federal Reserve</keyword> cut down the benchmark <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> by 50 basis points , bringing the target rate range to 4.75%-5%, from its previous scope of 5.25% to 5.5%. The decision, which was taken 11:1, was not unanimous, a striking departure from all other unanimous interest rate decisions taken by Fed over the last 2 years. Per chairman <keyword id="20058769" type="General" weightage="20" keywordseo="jerome-powell" source="keywords">Jerome Powell</keyword>, the decision was taken in light of easing inflationary pressures in the US economy, which came down to 2.53% this month, as opposed to 2.89% a month prior, and 3.67% last year. "In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective", the FOMC committee highlighted in its statement. Signaling more aggressive rate cuts going ahead, Fed projections implied an additional 50 bps rate cut from current levels within 2024, with rate trims going as high as 100 bps in 2025, and another 50 bps in 2026. Notably, last month, Powell had strongly hinted towards a rate cut, saying it was "time for policy to be adjusted". Over the last few years, high interest rates had made home equity loans and credit card interest rates super expensive. In March 2022, which was the first time Fed hiked interest, rates on home equity loans stood at 5.96%%. This has jumped to 8.49% in September 2o24. At 20.78%, credit card interest rates have also been sky-high, swelling by over 400 basis points since March 2022. Indian markets stay flat On Wednesday, Indian equity markets maintained a cautious outlook, with <keyword id="19950208" type="General" weightage="20" keywordseo="BSE-Sensex" source="keywords">BSE Sensex</keyword> and Nifty50 dipping by 0.16% each to close the day in red. During the day, both Sensex and Nifty scaled record highs of 83,326.38 points, and 25.377.55 points respectively. Most market experts anticipated a 25-bps rate cut, but with Fed delivering a mammoth-size cut, the focus is now set to shift from inflation to unemployment, with the rate cut offering much-needed, immediate relief to US economy, which has, for long, been battling high borrowing costs. Per Fed officials, unemployment is set to rise to 4.4% this year, up from its present rate of 4.2%, as recorded in August. Per Bloomberg reports, shortly after the announcement, gold prices also jumped to record highs. The prices of yellow metal were already hovering near all-time highs ahead of the announcement. A rate cut pushes to weaken the greenback, which is what gold is priced in internationally. This makes bullion cheaper, pushing up its demand globally.

Fed trims interest rates by 50 basis points, gold prices touch record-high

<ul class="summary-list"><li>The S&amp;P 500 might be stuck in place for the rest of the year, Ed Yardeni says.</li><li>The market vet thinks no more Fed rate cuts are coming until 2025 as the economy stays strong. </li></ul>The stock market could be bumping up against a ceiling for now, market veteran Ed Yardeni said. The longtime investor and president of Yardeni Research said he sees limited capacity for central bankers to cut interest rates, thanks to the strength of the US economy and a troubling outlook for the federal debt balance. That means further policy easing may not come until 2025 — and the S&amp;P 500 could stay stuck around 5,800 through the end of the year, he said in a recent note to clients. That would imply less than a 1% gain for the benchmark index in the next two months. Stocks have already been going "nowhere fast" since the Fed issued a jumbo-sized rate cut in September, Yardeni said. The S&amp;P 500 has climbed 2% since the Fed's last policy meeting, while the S&amp;P 500 equal-weighted index has risen 3.8%."We expect that it might go nowhere fast over the rest of this year too, hovering around 5,800. The outlook for fiscal policy will probably remain unsettling after the election and the Fed might not lower the FFR over the rest of this year after all," Yardeni wrote.Yardeni pointed to strength in recent economic data, which suggests that further rate cuts might not come out of the Fed's meeting this week or in December. For one, real GDP growth was strong in the third quarter, rising 2.8% year-over-year. Business equipment investment rose 11% over the third quarter, following a near-10% increase in the prior quarter. Investment in information processing equipment, in particular, hit a record high, according to data from the Bureau of Economic Analysis.<div type="image" title="Graph showing business equipment investment growth" height="794" width="1332" msid="114956591" hostid="261" sizebytes="56966"></div><a target="_blank" class="" href="https://www.businessinsider.com/october-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-11#:~:text=The%20US%20economy%20added%20just,due%20to%20hurricanes%20and%20strikes.">Weakness in the job market</a> has concerned some investors, with the US adding far fewer payrolls than expected in October. Yet, analysts have said the labor market weakness was at least partly the result of events including <a target="_blank" class="" href="https://www.businessinsider.com/boeing-union-iam-endorses-contract-pay-raise-strike-2024-10">union</a> <a target="_blank" class="" href="https://www.businessinsider.com/dockworkers-port-strike-ila-impacts-2024-10">strikes</a> and <a target="_blank" class="" href="https://www.businessinsider.com/hurricane-milton-helene-unemployment-job-growth-presidential-election-inflation-harris-2024-10">Hurricanes Helene and Milton</a>.Importantly, the unemployment rate remained near a historic low last month at 4.1%."The bond market agrees with our opinion that the Fed cut the FFR too much, too soon," Yardeni added, pointing to the recent rise in bond yields, which indicate higher interest rate expectations among bond investors.Government borrowing, meanwhile, looks poised to increase over the coming months, a factor economists have said could <a target="_blank" class="" href="https://www.businessinsider.com/us-debt-problem-explained-deficit-gdp-inflation-economy-interest-rates-2024-4#:~:text=The%20government's%20soaring%20debt%20balance,future%2C%20economists%20told%20Business%20Insider.">indirectly fuel inflation</a>, and therefore limit the Fed's ability to cut rates."What can we expect when the current debt limit suspension ends on January 2? A divided government could force the Treasury to use extraordinary measures (as it did early last year) to fund the government while Congress debates the ever-increasing debt limit. It may take a debt crisis in the bond market to rein in Washington's fiscal excesses," Yardeni said.Yardeni has warned clients before about the possibility that <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-fed-outlook-recession-economy-stocks-ed-yardeni-2024-10">no further rate cuts</a> are delivered by the Fed in 2024. However, most investors expect the Fed to cut rates by 25 basis points this week and cut by the same amount in December, according to the <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch tool</a>. Some forecasters have even floated another <a target="_blank" href="https://www.businessinsider.com/next-fed-rate-cut-forecast-jumbo-unemployment-labor-market-citi-2024-11">jumbo-sized rate cut</a> this year as the labor market could be weaker than it appears on the surface.

Stocks might 'go nowhere' for the rest of this year amid Fed uncertainty and US debt concerns, market vet says

<ul class="summary-list"><li>US stocks traded mixed as investors looked ahead to the central bank's meeting minutes.</li><li>The release will offer more insight into what the Fed is thinking about monetary policy and inflation.</li></ul>US stocks were mixed early Wednesday as traders looked ahead to the minutes of the Federal Reserve's last policy meeting, which should give further guidance on the path of interest rates for the rest of the year. All three benchmark indexes traded slightly in the red, while bond yields were up slightly. Investors will be parsing through the Fed's latest meeting minutes later on Wednesday, which will give more insight into what central bankers are thinking about the economy and the trajectory of rate cuts this year and beyond. Monetary policy is in focus after an unexpectedly hot job report in September, fueling doubt over whether the Fed will issue another jumbo rate cut this year."The minutes of the last Federal Reserve meeting are due, and should be fascinating," Paul Donovan, the chief economist of UBS Global Wealth Management, said in a note. "The tone of the Fed minutes should not change expectations of further rate cuts—the Fed is still scrambling to catch up with inflation slowing in the US, and started cutting rates late. But expectations about the pace of easing may be set by the minutes."According to Pantheon Macroeconomics, the Fed is more likely to begin cutting rates in 25-basis-point increments rather than issuing another 50-basis-point rate cut."Even so, we still think the FOMC is putting undue emphasis on the current strength of the economy rather than the direction of travel and the lagged impact of earlier tightening still in the pipeline," economists at the research firm said in a note. "We expect a 25bp easing in November but think a soft run of jobs and activity data in Q4 and Q1 will soon have the Fed scrambling to avoid falling behind the curve."Central bankers will assess another jobs report and the September Consumer Price Index, which will be published Thursday morning, before making their next rate move. The inflation report will be a high-stakes data point for the Fed after the big September payroll report, with markets anxious that officials may have to turn their attention back to prices after pivoting to the labor market at their last meeting. Markets are pricing in an 88% chance the Fed will issue a quarter-point cut, while odds of another jumbo-sized cut have been slashed completely, according to the <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch tool</a>.Google parent Alphabet fell 1% in early trading as the US Department of Justice <a target="_blank" class="" href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.223205/gov.uscourts.dcd.223205.1052.0_1.pdf">indicated it could break up the tech giant</a>. Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Wednesday:<ul><li><a target="_blank" href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">S&amp;P 500</a>: 5,752.93, up 0.06% </li><li><a target="_blank" href="https://markets.businessinsider.com/index/dow_jones?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">Dow Jones Industrial Average</a>: 42,194.38, up 0.27% (+114 points)</li><li><a target="_blank" href="https://markets.businessinsider.com/index/nasdaq_composite?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">Nasdaq composite</a>: 18,150.47, down 0.18%</li></ul>Here's what else is going on:<ul><li><a target="_blank" class="" href="https://www.businessinsider.com/fed-interest-rate-cuts-outlook-economy-recession-no-landing-borrowing-2024-10?_gl=1*i6n3nu*_ga*OTI1ODIwOTQ2LjE3MTYzOTg2NjU.*_ga_E21CV80ZCZ*MTcyODQ3ODgzNS40MjMuMS4xNzI4NDgwNDc4LjMxLjAuMA..">The economy is facing a "no-landing" scenario</a> that could take away some relief from higher interest rates.</li><li><a target="_blank" class="" href="https://www.businessinsider.com/mortgage-rate-increase-since-federal-reserve-cut-interest-rates-housing-2024-10?_gl=1*i6n3nu*_ga*OTI1ODIwOTQ2LjE3MTYzOTg2NjU.*_ga_E21CV80ZCZ*MTcyODQ3ODgzNS40MjMuMS4xNzI4NDgwNDc4LjMxLjAuMA..">Fed rate cuts were expected to push mortgage rates lower</a>, but the opposite has happened.</li><li><a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stocks-q3-earnings-lower-rates-stocks-returns-outlook-bofa-2024-10">The bar for corporate earnings is low</a>. That's good news for stocks, as long as companies are feeling upbeat about rate cuts, according to Bank of America.</li></ul>In commodities, bonds, and crypto:<ul><li><a target="_blank" href="https://markets.businessinsider.com/commodities/oil-price">West Texas Intermediate</a> crude oil dipped 2% to $72.06 a barrel. <a target="_blank" href="https://markets.businessinsider.com/commodities/oil-price">Brent crude</a>, the international benchmark, was fell 2% to $75.63 a barrel.</li><li><a target="_blank" href="https://markets.businessinsider.com/commodities/gold-price">Gold</a> slipped 0.39% to $2,612.00 an ounce.</li><li>The 10-year Treasury yield was about flat at 4.041%.</li><li><a target="_blank" href="https://markets.businessinsider.com/currencies/btc-usd">Bitcoin</a> edged lower 0.8% to trade at $61,930.</li></ul>

Stock market today: US stocks trade mixed with Fed minutes and rate outlook in focus

<ul class="summary-list"><li>Leading strategists generally agree that trying to trade around the election is a mistake.</li><li>But one chief economist says there's a notable exception if a certain result plays out.</li></ul>Election-year autumns are full of debates, including Tuesday night's <a target="_blank" href="https://www.businessinsider.com/jd-vance-tim-walz-vp-debate-agreement-civility-2024-10">refreshingly respectful and civil</a> vice-presidential showdown between Democrat Tim Walz and Republican JD Vance.But there isn't usually much disagreement about how to trade heading into elections.Top market strategists and economists at the Bloomberg Volatility Forum on October 1 generally agreed on one point: Investors who don't bet on the outcome of elections may be better off.The race between Kamala Harris and Donald Trump will be too close to call, according to <a target="_blank" href="https://www.270towin.com/2024-presidential-election-polls/">the latest polls</a> and <a target="_blank" href="https://puck.news/podcast_episode/nate-silver-harris-v-trump-is-the-closest-election-ive-ever-seen/">top political pundits</a>, so market veterans said investors shouldn't try to predict who will win.And even if a crystal ball told traders who'd win the White House, it may not make them money, as Nancy Davis, the founder and chief investment officer at Quadratic Capital, noted."Market timing, to me, is something really, really hard to do — because even if you know the event outcome, you don't necessarily know how liquidity is positioned or how much cash is on the sideline," Davis said, citing the aftermath of Brexit as an example.Still, investors should be mindful that one outcome — a Trump presidency that implements some of the toughest economic sanctions he campaigned on — could cripple growth and inflation, says Tom Orlik, the chief economist at Bloomberg Economics.<h2 id="839694a0-f1ec-457d-9262-aa3ac1dcb979">The market isn't freaking out about the election, but protection may still make sense</h2>Market volatility, as measured by the CBOE Volatility Index (<a target="_blank" href="https://markets.businessinsider.com/index/vix">VIX</a>), has historically been elevated in the month before US elections, said Tanvir Sandhu, the chief global derivatives strategist at Bloomberg Intelligence. The VIX usually hovers around 25 in October, Sandhu noted. For context, the volatility gauge usually stays between 10 and 20 and only rarely approaches 30.While the VIX is up 23% since late September, the so-called "fear index" is still under 20. That relatively muted volatility coincides with a strong stretch for US stocks. The S&amp;P 500 is trading near record highs after a <a target="_blank" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">larger rate cut</a> than many market participants expected.Considering the looming election and its impossible-to-predict implications, it's fair to wonder whether investors are being complacent. Traders who are feeling antsy may seek to hedge by buying <a target="_blank" href="https://www.investopedia.com/terms/p/putoption.asp">puts</a> or selling <a target="_blank" href="https://www.investopedia.com/terms/c/calloption.asp">calls</a>, especially since options premiums aren't overly pricey.Or, as Chris Murphy, the cohead of derivatives strategy at Susquehanna put it, investors may want "upside protection" so they're not caught offside if markets suddenly surge. Since volatility is in check, buying calls may pay off."We typically see a rally into year-end after the election," Murphy said. "There are opportunities there to protect yourself" from such an upswing without going all in, he added, like buying cheap calls.<h2 id="023e721c-202d-438b-8516-970d8bc4f050">One election result may cause 'seismic shocks'</h2>Partisans are convinced that this election is the most important ever, as they <a target="_blank" href="https://www.vox.com/21504729/most-important-election-bush-gore-kerry-trump">always</a> <a target="_blank" href="https://slate.com/news-and-politics/2020/11/most-important-election-of-our-lifetimes-history.html">are</a>. The market isn't convinced, judging by where the VIX is trading just a month away from election day.But Orlik of Bloomberg Economics disagrees. He foresees three plausible outcomes from next month's elections, including a potentially dangerous one.The status-quo outcome would be if Harris beats Trump and Congress remains divided. In that scenario, Orlik would expect continuity and similar economic policies as Joe Biden has had.Another positive result for investors could be if Trump wins and his second term is similar to his first, where taxes and regulations are kept at a minimum, Orlik said. He pointed out that this type of Republican presidency has historically been one of the best environments for US stocks and the economy."Implicit in the sanguine anticipation of the election from the financial markets is the baseline view that either it be continuity with Kamala Harris, or it'll be the small government," Orlik said.The third potential result is what has Orlik worried: a Trump term with "extreme" policies on <a target="_blank" href="https://www.pbs.org/newshour/economy/trump-favors-huge-new-tariffs-how-do-they-work">tariffs that he's floated</a> and deportation of undocumented immigrants."I don't think people are actually taking that possibility extremely seriously right now, but perhaps they should," Orlik said. "Because these would be seismic shocks to the US economy — an absolutely enormous impact on growth, an absolutely enormous impact on inflation, and an enormous impact on Fed policy."Tariffs are import taxes designed to make domestic goods relatively attractive while raising money for the government that issues them. However, many economists and <a target="_blank" href="https://www.businessinsider.com/how-to-invest-stock-market-international-investing-strategy-charles-schwab-2024-6">strategists hate them</a> because they can make all goods more expensive while hurting economic growth.Both Trump and Biden have implemented tariffs against rivals like China, but Orlik believes Trump's latest proposals — which include a 60% tariff on Chinese goods and a 20% tariff on all other imports — would devastate the US economy and corporations."Let's think about a world where Trump gets into power and poses a 60% tariff on China," Orlik said. "Can anyone think of a company — perhaps a company with a fairly large weight in US equity indexes that wouldn't be able to operate in a world of 60% US-China tariffs? I can think of a lot: Apple, Nvidia, Qualcomm — all of the companies big in the US equity indexes near record highs would basically not be able to operate their supply chains in a world of 60% US-China tariffs."Murphy isn't as concerned as Orlik since Trump could always backtrack on tariffs, but he still believes that investors should be on their toes heading into November 5."Trump sees the stock market tanking, and then does he go, 'I'm not doing this anymore because my stock market's tanking,' and he reverses very quickly," Murphy said. "So you have to monetize those tail hedges potentially pretty quickly, but a tail hedge like that could — in theory — be something that catches people off guard."

Beware of 'seismic shocks' to the US economy and inflation if this specific election outcome occurs, according to a top mind at Bloomberg Economics

<ul class="summary-list"><li>The Fed is going to cut interest rates by 50 basis points in December, Citi economist Veronica Clark said.</li><li>Labor market weakness is showing across a number of data points, she said.</li></ul>The Federal Reserve isn't finished with aggressive interest rate cuts this year, a Citi economist said on Monday.According to Veronica Clark, deteriorating labor dynamics will force the central bank to cut rates by 50 basis points in December."We see this weakening labor market dynamic across a number of different data points: low hiring rate, low quit rates, new hours worked coming down," she told <a target="_blank" href="https://www.youtube.com/watch?v=OjG2peqST0s">Bloomberg TV</a>. "This does feel like labor demand that is pretty soft."Her point has grown more evident after <a target="_blank" href="https://www.businessinsider.com/october-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-11">October's jobs report</a> underwhelmed expectations with only 12,000 jobs added. Though hurricanes and industry strikes made last month's data an anomaly, October's weakness pairs with a broader labor-market weakening.Clark cited that <a target="_blank" href="https://www.bls.gov/news.release/empsit.nr0.htm#:~:text=With%20these%20revisions%2C%20employment%20in,:30%20a.m.%20(ET).">big downward payroll</a> revisions continue to undercut economists' understanding of how strong the jobs market really is."We did get preliminary estimates of the benchmark revisions a couple of months ago. That implies payrolls are overstated by about 70k right now," she said.Clark's outlook runs counter to the consensus on Wall Street that the Fed will roll out a slow and steady easing cycle. A <a target="_blank" class="" href="https://www.businessinsider.com/september-jobs-report-unemployment-rate-nonfarm-payroll-growth-federal-reserve-2024-10">strong September jobs report</a> that saw a surprise unemployment decline, as well as moderating inflation, have given investors confidence that the economy has room to cut rates.But Clark suggested that the jobless rate is unlikely to remain at 4.1% for long.Though October's unemployment rate stayed unchanged on a rounded basis, Clark noted that it was it nearly rounded to 4.2%."I do think this is kind of confirming that that drop in September doesn't necessarily repeat," she said, and added: "When you have such weak hiring, you would be inclined to think people will just stay unemployed for longer, and there's that upward pressure on unemployment still."Clark expects that the Fed will lower rates by a quarter-point at its policy meeting on Thursday, as do a vast majority of investors.However, no investor has yet priced in a half-point cut the following month, as Citi suggests will happen. Instead, <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">CME FedWatch Tool</a> data shows 82.8% odds of another quarter-point cut in December.

Another jumbo Fed cut is coming by year-end with the US labor market weaker than many think, Citi economist says

<ul class="summary-list"><li>The Federal Reserve cut interest rates by 50 basis points on Wednesday.</li><li>It's the first interest-rate cut in over four years.</li></ul><a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-decision-this-week-federal-reserve-powell-inflation-2024-9">An interest-rate cut</a> has arrived — and it's a big one.On Wednesday, the Federal Open Market Committee announced it would be cutting interest rates by 50 basis points. It's the first time the Federal Reserve has cut rates since March 2020.This puts an end to the central bank's aggressive inflation fighting during the pandemic and confirms Fed Chair Jerome Powell's remarks during his address at Jackson Hole last month, during which he said that "the time has come for policy to adjust": The economy is continuing to inch toward the Fed's 2% inflation target, and it would soon be appropriate to ease off of the restrictive monetary policy.The consumer price index, which measures inflation, <a target="_blank" class="" href="https://www.businessinsider.com/inflation-august-consumer-price-index-federal-reserve-rate-cuts-2024-9">rose 2.5%</a> year over year in August, coming in below July's 2.9% reading. The unemployment rate also unexpectedly ticked down in August, giving the Fed the data it needs to cut rates.According to <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch</a>, which estimates interest rate changes based on market predictions, a rate cut was all but certain; the question was how big of a cut the Fed would implement. Markets were expecting a 50-basis-point cut, per the predictions, and Wednesday's announcement fell in line with expectations.Additionally, some economists and Democratic lawmakers have been calling for a rate cut of at least 50 basis points for months. Skanda Amarnath, executive director of advocacy group Employ America and a former Fed economist, told reporters at a Monday briefing that "it's better to act early.""It's better to move faster before the data is screaming that we're in a recession because, by that time, 50 basis points may be just not enough," he said.Democratic Sens. Elizabeth Warren, John Hickenlooper, and Sheldon Whitehouse wanted Powell to go even further, urging him in a Monday <a target="_blank" class="" href="https://www.warren.senate.gov/imo/media/doc/warren_hickenlooper_whitehouse_letter_to_fed_re_september_rate_cut.pdf">letter</a> to cut interest rates by 75 basis points."If the Fed is too cautious in cutting rates, it would needlessly risk our economy heading towards a recession," they wrote.While Powell has faced criticism from some experts and lawmakers for waiting too long to cut rates, he has said multiple times that it was better for the Fed to hold off until it received all the data it needed rather than cutting rates too early and having to hike again at a later date.It's unclear how aggressively the Fed will continue to cut in the coming months, but it'll take time for Americans to feel the relief's impact. There will likely be lags in the housing and car industries, as a single rate cut will not have a material impact in the short term. The same goes with credit cards — interest rates on credit cards have been at historic highs, and it'll take a while for those with balances to see relief.Specifically, credit-card interest rates have almost doubled over the past decade to 22.8%, with delinquencies on the rise, and <a target="_blank" class="" href="https://www.businessinsider.com/todays-mortgage-rates-tuesday-17-2024-9">average rates</a> for 30-year fixed mortgages now stand at 5.50%.But overall, it's a positive signal for the direction of the US economy."They're going to cut rates this week," Bharat Ramamurti, senior advisor for economic strategy at the American Economic Liberties Project, told reporters during a Monday briefing. "And that is a sign from the body that is most focused on this, that our war on inflation is over."

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