Thu Dec 19 15:02:45 UTC 2024: **Global Markets Tumble After Fed’s Hawkish Rate Cut**

**Mumbai, India –** Global markets experienced a significant downturn on Thursday following the US Federal Reserve’s decision to cut interest rates by 25 basis points to a range of 4.25%-4.5%, but simultaneously signal a more cautious approach to future rate reductions. The move, coupled with the Fed’s projection of only two further rate cuts in 2025 (down from a previously anticipated four), triggered widespread selling.

In India, gold prices plummeted ₹800 per 10 grams, reaching ₹78,300, while the Sensex plunged nearly 965 points, falling below the 80,000 mark. Analysts attributed the Indian market’s decline to heavy losses in consumer durables, banking, and IT sectors, exacerbated by foreign fund outflows. Asian and European markets also closed in negative territory, mirroring a steep decline on Wall Street the previous day. The Indian rupee weakened past 85 to the US dollar for the first time.

The Fed’s decision, while including a rate cut, was interpreted as hawkish due to the reduced forecast for future cuts. This was attributed to persistent inflation (remaining above the Fed’s 2% target), robust economic growth, and uncertainty surrounding the incoming Trump administration’s policies. Concerns were also raised about the potential inflationary impact of Trump’s proposed tariffs and China’s stimulus measures.

While some analysts viewed the initial rate cut positively, the shift towards fewer anticipated cuts in 2025 unsettled investors. The reduced prospect of lower borrowing costs dampened expectations for significant reductions in loan rates for consumers and businesses. Experts pointed to the potential for reduced foreign capital inflows into India as US debt markets become more attractive.

Despite the market turmoil, some analysts expressed optimism about the long-term prospects of the US and Indian economies, anticipating a soft landing for the US and highlighting India’s strong fundamentals and its appeal as a diversification opportunity for global investors. However, the immediate outlook remains uncertain, with the trajectory of future rate cuts contingent upon incoming economic data and political developments in 2025. The Bitcoin market also reacted negatively to the Fed’s announcement, initially dropping below $100,000 before experiencing a partial rebound.

Read More