• The US Federal Reserve on Wednesday left the key interest rates unchanged for the fourth row in citing easing inflation over the last year.
• The U.S. central bank's latest policy statement gave no hint that a rate cut was imminent, and indeed said the policy-setting Federal Open Market Committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," the Fed's inflation target.
• It is expected that the policy easing could begin as early as in first quarter of 2024.
• Nonfarm payrolls in the country increased by 216,000 in December, while the economy grew more than expected 3.3% in the December quarter.
• The policymakers signalled that they expect to make 75 basis points (bps) cuts to their benchmark interest rate in 2024.
• It expects a soft landing in the US economy with growth slowing to a 2.1% annual rate in 2024 from 2.5% last year. Growth is seen slowing further to 1.7% in 2025.
• Yields on the US 10-year treasury note, which were trading at 4.20% before the December meeting, dropped to 3.79% after Fed guided for rate cuts in 2024, but have since then inched up again and are trading at around 4%.
• The dollar index has gained 1.5% since the Fed’s December meeting.

Impact on the markets

• Both Indian and USA Markets up ahead of budget

Conclusion of meeting

Rate cuts are expected soon.

Best Regards,

Research Team