US Fed Rate Cut by 25 Basis Points: Check Impact on Indian Stock Market

The US Federal Reserve announced its 8 policy decision for 2024 following a 2-day Federal Open Market Committee (FOMC) meeting on December 19, 2024. On Wednesday, December 18, the committee voted 11-1 to slash the benchmark interest rate by 25 basis points (bps), bringing it to a range of 4.25%–4.50%.

This underscores the US Fed’s 3rd consecutive rate cut in 2024 and the second 25-bps reduction in a row. Under Chairman Jerome Powell, the Fed expects only two additional rate cuts in 2025, following the latest inflation data showing that consumer prices remain “somewhat elevated” in the US economy.

In September, the Fed had slashed the benchmark rate by 50 bps, or half a percentage point, to a range of 4.75%-5.00%—the first reduction in 4 years. This decision came as policymakers expressed confidence that inflation was steadily moving toward the target level.

US Fed Rate Cut Impact on Indian Stock Market

Domestic equity benchmarks, Sensex and Nifty 50 are expected to open lower on Thursday following a global market slump after the US Fed lowered its rate-cut expectations for 2025. At 07:55 on December 19, 2024, Nifty futures were trading at 23,933.50, up 0.15%.

Global Markets Reaction

Following the US Fed rate cut news, Asian markets traded lower on Thursday, reflecting a sharp decline in US markets overnight. Japan’s Nikkei 225 fell 1.4%, and the Topix dropped 1.27%, ahead of the Bank of Japan’s monetary policy. South Korea’s Kospi index declined 1.84%, while the Kosdaq plunged 1.92%. Hong Kong’s Hang Seng index futures indicated a mildly higher opening.

US stocks ended sharply lower on Wednesday after the Fed’s rate cut, with projections that signalled a more cautious approach to rate easing in 2025.

The Dow Jones Industrial Average plummeted 1,123.03 points (2.58%) to 42,326.87, the S&P 500 fell 178.45 points (2.95%) to 5,872.16, and the Nasdaq Composite lost 716.37 points (3.56%) to close at 19,392.69. This marked the biggest one-day percentage drop for the Dow and S&P since August 5, and the largest decline for the Nasdaq since July 24.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.