US central bank reduced interest rates for the first time in two and a half years

New Delhi| America’s central bank, the Federal Reserve, announced a 50 basis point cut in interest rates on Wednesday. The Federal Reserve has cited increasing confidence due to low inflation as the main reason for this cut.

Interest rates have been reduced for the first time since March 2020. The effect of reduction in American interest rates will be visible in the stock markets of the world including India on Thursday. It is believed that this may lead to a rise in the stock market. Prior to this cut, the Fed Reserve had rates between 5.25 and 5.5 percent, the highest in 23 years. After the announcement of reduction in interest rates, the new interest rates have ranged between 4.75 and 5 per cent. Amidst inflation, there was also pressure on the American central bank to reduce interest rates.

Experts are hoping that another 50 basis points cut could be in interest rates this year. The committee is more confident that inflation is moving towards being around 2 percent, policymakers at the U.S. central bank said in a statement accompanying the cut announcement. Along with this, we also hope to maintain balance between our employment and inflation targets.

This cut by the US Central Bank means that the interest rates on government bonds there will also reduce. In such a situation, people will invest more in the stock markets instead of investing money in bonds. Its direct impact will be seen on Indian and other emerging stock markets because these markets are already successful in attracting investors.

Generally, the stock market booms due to reduction in interest rates but the American stock markets fell even after this announcement. It is believed that in view of the US presidential elections, the Democratic Party had put pressure on the Federal Reserve to reduce rates. However, the central bank has denied any political interference in the announcement.