There is constant uneasiness in the stock market. Sensex and Nifty closed with losses for the third consecutive day today on December 10. This happened because investors are currently waiting for a major decision. Along with India, markets all over the world are keeping an eye on this decision. The Federal Reserve Bank of America is going to announce this decision late tonight. It is believed that the US Federal Reserve Bank is preparing to cut interest rates for the third consecutive time today.
But the real question is not whether there will be cuts or not? The real thing is what does the Federal Reserve indicate regarding the policy for the new year 2026? This question is increasing the heartbeat of the market. Will the US Federal Reserve reduce interest rates today and is this the last stop of rate cuts?
The Federal Reserve Bank of America is going to announce the results of its two-day meeting today. Most economists, and a Reuters survey, are saying that the Federal Reserve Bank can cut interest rates today by 25 basis points, i.e. a quarter percent. This will bring the US federal funds rate between 3.5 – 3.75%. The stock market is also waiting for the same. But the real focus of the market rests on the press conference and statements of Federal Reserve Bank Chairman Jerome Powell after this cut.
Is the rate cut phase going to stop now?
Many big brokerage houses, including Goldman Sachs, say that even if the Federal Reserve cuts interest rates today, any rate cut from here onwards is not easy. He says that the inflation rate in America still remains at 2.8%, which is above the Federal Reserve’s target of 2%. In such a situation, if interest rates fall further, it may be difficult to achieve this target. Price increases from Trump tariffs are also adding to the uncertainty. Meanwhile, another major blow came when the US government shutdown stopped the reporting of many important economic data last month. That means the Federal Reserve does not yet have enough data to take the right decision.
What decision will the Federal Reserve Bank take today?
Most experts say that the Federal Reserve Bank may decide to cut interest rates today, but at the same time it may also indicate a ‘hawkish’ stance. That is, the Federal Reserve Bank may indicate that it may not cut interest rates sharply further.
All eyes will be on the new economic projections to understand the stance of the Federal Reserve. This will only indicate to what level interest rates can be cut in 2026. At present, the estimates of Fed officials are quite different from each other. Some feel that inflation may persist for a long time, hence the policy should be tightened. Others say that the labor market is cooling, so further cuts will be necessary in the year 2026. That is, there seems to be no consensus on this issue within the Federal Reserve Bank and this is increasing uncertainty in the global markets.
Market also keeps an eye on quantitative tightening (QT)
Apart from interest rates, this time everyone’s eyes will be on another signal. Stock markets will want to know what signals the Federal Reserve gives regarding its balance sheet. Earlier there have been indications that the Federal Reserve may stop the process of reducing liquidity by quantitative tightening (QT) i.e. by selling bonds. There are some indications that the Federal Reserve may even purchase bonds in the future to increase liquidity. If this happens, it will be a big signal for the stock market.
Overall, due to these uncertainties, the entire global market is under pressure. American stock markets are also in the red. There is also weakness in the markets of Shanghai, Hong Kong and Tokyo. In India too, Sensex and Nifty are in decline for three consecutive days.
If the Federal Reserve Bank indicates that the cuts will continue in 2026, then most experts say that this can be very positive news for the stock market. If the reverse happens, then pressure can be seen on the market.
When will the decision come?
The decision will come at 12:30 am IST on Thursday, and will be immediately followed by Powell’s press briefing, which will provide clarity on how the Fed plans to handle the next phase of inflation.
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