The US Federal Open Market Committee (FOMC) is set to meet on Wednesday and is expected to make an announcement regarding federal rate changes on Thursday. The November 2024 FOMC meeting, headed by Fed Chair Jerome Powell, is particularly crucial as it coincides with the election frenzy surrounding the US Presidential Election 2024. In its previous meeting, the FOMC had reduced rates by 50 basis points.
The FOMC’s November 2024 meeting will take place on November 6 and 7. Fed Chair Jerome Powell is expected to announce the outcome of the meeting on Thursday, November 7, likely by 11:30 pm. Market participants are speculating that the FOMC may announce a 25 basis points rate cut, which could have significant implications for global markets, including emerging markets like India.
A potential rate cut by the US Federal Reserve could mean a lower cost of borrowing for companies and customers. When the US slashes interest rates, the Reserve Bank of India (RBI) may follow suit. A lower interest rate reduces the cost of borrowing for companies, incentivizing them to take more loans and invest in the economy. Additionally, a rate cut by the US Fed typically results in the depreciation of the dollar, which could lead to an appreciation of the rupee. This could make imports cheaper while making exports costlier, thus impacting the trade balance, including the price of crude oil.
As for the Indian stock market, a rate cut could potentially be good news. Lower borrowing costs for companies would enable greater cash flow, which could fuel investments and expansion, driving positive sentiment among investors. While these factors bode well for the market, too much money supply and excessive borrowing could eventually lead to inflation, which the government and the RBI will need to manage carefully.
