The Federal Reserve sent a 50 basis point rate cut, accompanied by a speech from its chairman, Jerome Powell. The messages were mixed to the markets, as the first cut since the 2020 Corona pandemic, and the largest in 22 years, were priced in.
Expert opinions: Christopher Rupkey, chief economist at FWDBONDS, said that markets got the cut they wanted. But he pointed to some investors’ nervousness about what the Fed sees.
Asian markets rise: Japanese stocks and US stock futures rose after the decision. The “Topix” and “Nikkei 225” indexes rose, with the yen falling by more than 1%.
The impact of the dollar: The US dollar index rose after the rate cut, as traders await decisions from Britain and Japan. The yen fell to around 144 against the dollar, with the 10-year Treasury yield rising.
Bitcoin performance: Bitcoin price hit a three-week high, rising 3.9% to $61,980. Caroline Moron of Orbit Markets said that the strong start to the easing cycle means good news for riskier assets.
Mixed metals and oil prices: Copper approached a three-week high, but prices fell by 0.4%. While Brent crude futures rose by 0.88%.
Key points in the Fed’s decision
Cut interest rates by 50 basis points to a range of 4.75%-5.0%.
The decision was opposed by Michelle Bowman, the first dissent since June 2022.
Expectations indicate a one-point cut by the end of the year.
Rate forecasts for 2025 were reduced to 3.4%.
Powell’s statements: Jerome Powell confirmed in the press conference that the Fed was not in a hurry to cut rates, indicating that there were no signs of recession risk in the US economy.
Impacts on Gulf banks
The central banks of Saudi Arabia, the UAE and Bahrain cut interest rates by 50 basis points, in line with the Fed’s decision. Qatar also cut interest rates by 55 basis points, while the Central Bank of Kuwait cut the discount rate by 25 basis points.
Conflicting expectations for the future of gold in the global stock market: There are conflicting expectations for the future of gold in the global stock market, as investors await the results of the Federal Reserve meeting. The market is divided over the size of the expected cut, with increasing talk about the possibility of gold reaching $3,000 if interest rates are cut by 50 basis points.
Expert opinions: Julia Khandushko, CEO of Mind Money, said that a 50-point cut in interest rates could push gold higher. She stressed that future interest rate cuts will be the main driver for gold reaching $3,000.
She added: “When the Federal Reserve starts easing monetary policy, the question will be when will gold reach unprecedented levels.”
The impact of the low interest environment: Gold bullion is more attractive in a low interest rate environment. With increasing talk of a higher-than-expected cut, analysts remain divided over the possible rate cut, whether it is 25 or 50 basis points.
Markets: Caution prevails over the performance of US stock indices. Wall Street is waiting for the first interest rate cut from the Federal Reserve in four years. Stocks were little changed, as gains were limited by uncertainty over the size of the cut. The S&P 500 index fell 0.1%, while the Dow Jones index fell 67 points, or 0.2%. The Nasdaq was little changed.
Gold price rises: Spot gold rose to $2,577 per ounce, up 0.3% on the day. Bullion hit a record high of $2,589.59 on Monday..
What impact will a rate hike have on the dollar?
In short, when interest rates are raised, this leads to: An immediate decline in demand for borrowing. Conversely, an increase in demand for depositing money. These matters may lead to slowing economic growth rates.
The impact of rising interest rates on the Egyptian and global economy: Analyses have indicated that rising interest rates will lead to the flight of hot money from most banks, whether Gulf or Egyptian. Investors seek the highest possible returns, which makes the situation more complicated.
Negative consequences for the Egyptian economy: This phenomenon is very negative for the Egyptian economy, especially in light of global economic crises. The market suffers from a shortage of dollars due to multiple crises, including the Ukrainian crisis, which increases pressure on the economy.
Consequences of financial instability: Capital flight can lead to a reduction in local investments, which exacerbates economic challenges. Therefore, rising interest rates reflect a state of instability, which may negatively affect economic growth in Egypt and the world.
What is the interest rate on the dollar? The Federal Reserve (the US central bank) announced today, Wednesday, to keep interest rates unchanged at a range of 5.25-5.5% with the approval of all members, to be the fourth consecutive decision to fix the interest rate since September 2023.
The impact of the Fed’s decision to fix the interest rate on the dollar: The US Federal Reserve’s decision to fix the interest rate led to a broad decline in the dollar. At the last meeting in March, the bank maintained its expectations for reducing interest rates in the second half of the year.
Expectations of a decline in the dollar: With the Fed’s expectations to reduce interest rates, the dollar is expected to continue to decline in global markets..
Implications for global markets
If the dollar continues to decline, we may witness fluctuations in financial markets, as central banks try to adapt to the new changes. Therefore, the coming days will be pivotal in determining the path of the dollar.
What are the latest decisions of the Central Bank 2024? : The Monetary Policy Committee of the Central Bank of Egypt decided in its meeting on Thursday, September 5, 2024, to maintain the overnight deposit and lending rates and the Central Bank’s main operation rate at 27.25%, 28.25% and 27.75%, respectively. It also decided to maintain the credit and discount rate at 27.75%
When is the next US Federal Reserve meeting in 2024?
Date of the next US Federal Reserve meeting in 2024: The US Federal Reserve will meet once before the end of 2024, while the US Federal Reserve meeting will continue for two days, Tuesday and Wednesday of next December, and is expected to result in a reduction in the interest rate on the dollar as well, at the same pace expected for the current Federal Reserve meeting.
