“It is time to adjust policy… The timing and pace of rate cuts will depend on upcoming data, the evolving outlook, and the balance of risks,” Powell said in a much-anticipated speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming.
Markets interpreted Powell’s comments as a signal that the Fed will cut interest rates in September for the first time in four years.The Dow Jones Industrial Average rose 1.14% on Friday, while the Nasdaq Composite and S&P 500 rose 1.47% and 1.15%, respectively.
“The comments at the Jackson Hole Symposium have further boosted rate cut expectations and the only question now is the magnitude of the cut,” said Pankaj Pandey, head of retail investor research at ICICI Securities. “This is expected to improve the ‘risk-on’ sentiment in India and take the market to new highs.”
The US interest rate cut will benefit emerging market equities, including India, as a weaker dollar and lower bond yields tend to increase appetite for riskier assets among foreign fund managers. Investors have largely stayed away from emerging markets after the Fed implemented 11 aggressive interest rate hikes between March 2022 and July 2023 to contain inflation. Pandey said he expects the Nifty to be at 27,500 levels a year from now. On Friday, the Nifty closed at 24,823.15, up just 11.65 points or 0.05 percent, while the Sensex closed at 81,086.21, up 33.02 points or 0.04 percent. Over the past week, both indexes have risen less than 1 percent each. In recent weeks, markets have struggled to regain the bullish momentum seen before August. After a brief sell-off in equity markets triggered by the unwinding of the yen carry trade in the first week of August, the Sensex and Nifty have been sluggish.
