Fed Rate Cut: Asian Stocks Gain As Fed Locks In Half-Point Cut To Aid Economy
Median Fed officials now expect to lower rates by one percentage point by year-end.
Chair Jerome Powell at the FOMC press conference on Dec. 13. (Source: Federal Reserve/X)
Traders lined up bets to send Asian stocks higher after the US Federal Reserve slashed key rates by 50 basis points, signalling further policy easing but without a rush.
The Japanese stocks led the advance with the Bank of Japan's rate cut decision due on Friday. S&P ASX 200 was up 0.51% at 8,183, while Nikkei was up 2.31% at 37,197 as of 6:00 a.m.
The Federal Open Market Committee lowered the rate for the first time in more than four years by 50 basis points to 4.75-5.00% on Thursday. The big cut was as per expectations as traders weighed on deeper cuts just ahead of the decision.
Dot plot of Fed officials' commentary now expects to lower rates by one percentage point by year-end, implying two more quarter-point cuts or one larger, half-point cut.
The US Central Bank revised the inflation outlook downward to 2.3%, compared to 2.6% previously. For core inflation, the committee lowered its projection to 2.6%, a decrease of 0.2 percentage points from June.
Chair Jerome Powell noted that the Fed is not in a pre-set course and dot plot projections are not a policy plan. "Our recalibrated policy stance will help maintain the strength of our economy and the labour market and continue."
Upside inflation risks have diminished and downside risks to employment have increased, Fed Chair Powell said in the press conference after the rate decision. "The rate cut is timely and don't think we are behind."
Meanwhile, following the Fed's cut, Hong Kong's monetary authority cut its base interest rate for the first time since 2020. Bank of England and Taiwan's interest rate decision is due on Thursday while Australia and Hong Kong will release unemployment print during the day.
US stock initially rose to a fresh record after the Fed made its big cut, but pared gains after the Fed signalled it’s not in a rush to ease policy. The gauge of 'Magnificent Seven' megacaps was down 0.1% while the small-cap benchmark was little changed, according to Bloomberg.
The S&P 500 and Nasdaq Composite slid 0.29% and 0.31%, respectively. The Dow Jones Industrial Average declined by 0.25%. Treasury 10-year yield advanced six basis points to 3.7%. Spot gold climbed to a record after the Fed cut rates by 50 basis points.
Brent crude was trading 0.46% lower at $73.31 a barrel as of 5:58 a.m. IST. West Texas Intermediate was down 0.59% at 70.49.
Key Levels
US Dollar Index at 101.09.
US 10-year bond yield at 3.72%.
Brent crude down 0.46% at $73.31 per barrel.
Bitcoin was up 3.16% at $62,136
Gold spot was down 0.07% at $2,557.23.
