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US Fed kept interest rate steady: Can we expect a rate cut in early 2024

US Fed kept interest rate steady

Dow Jones Industrial Average climbed Wednesday to touch the record high as the US Fed kept interest rate steady. The apex hinted that it might cut interest rates numerous times over the course of 2024. With these comments, the investors were satisfied that the central bank acknowledged slowing inflation trend because of which it opted for less-aggressive monetary stance. 30-stock index Dow Jones was able to add ~512.30 points, or 1.40%, to end the session at ~37,090.24 levels. With this, this index finally closed above 37,000 mark for the first time. This exceeded its previous record which was made in January 2022. At its session high, Dow Jones touched 37,094.85. 

S&P 500 saw an increase of ~1.37% to end at 4,707.09, exceeding ~4,700 for the first time since the month of January 2022. While the US Fed kept interest rate steady, investors continue to expect several cuts in 2024. Nasdaq Composite saw an increase of 1.38% to 14,733.96. By the close on 13th December, all the frontline indexes touched new 52-week highs. 

While the traders were on their toes, the US Fed kept its benchmark overnight borrowing rate steady i.e., in range of 5.25% – 5.5% range. This decision was expected by several traders and experts. However, it seems that the market paid more heed to the fact that the apex bank expects 3 rate cuts in 2024, and these expectations about the cuts were more than it earlier indicated. Equity markets welcomed this news as investors were hoping for the Fed to provide a clear signal about the rate cuts next year given that recent inflation data suggested easing.

The US Fed meeting statement specifically mentioned that inflation has eased in the previous year and the Federal Reserve decreased its inflation forecast for 2024, with expectations of ~2.4% rate down from ~2.6%. 

Coming to other asset classes, 10-year Treasury yield, which appears to be the benchmark for mortgage rates and other loans, fell to ~4.03% after the US Fed’s rate forecast release. If we talk about individual stock performances, shares of Bank of America and Wells Fargo saw an increase of 4% and ~3% on Wednesday, respectively. These banks will benefit if the interest rates are kept at around these levels. Shares of Home Depot increased by 3%. 

This momentum was seen across Asia-Pacific markets, with Australia’s S&P/ASX 200 ending higher by 1.65% to end at 7,377.90.

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I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as Investing.com, Stockhouse.com, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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