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News Topical, Digital Desk : Next week, the whole world will be watching the decision of the US Federal Reserve (Fed). The Fed may announce a cut in interest rates. This decision will have a big impact on the US economy as well as global markets, emerging countries including India. US President Donald Trump is eagerly waiting for this decision. Trump has been demanding low interest rates for a long time.
Trump has even called Fed Chair Jerome Powell "Too Late". But the Fed's decision will be based on data regardless of Trump's wishes. This decision can not only give new heights to the US stock market, but is also going to be important in terms of global trade and currency investment.
The series of record highs in the US market
US stock markets touched record levels again last week. Investors are confident of the Fed's rate cut of 25 basis points (0.25%) next week. According to the CME Fed Watch Tool, the probability of a rate cut this time is more than 90%. On Friday, all three major US indexes were mixed, but closed strongly on a weekly basis.
The Dow Jones rose nearly 1%, which is the first gain in three weeks. The S&P 500 index and the Nasdaq, the index of tech stocks, gave the best weekly performance since early August. Treasury yields remained at low levels, while gold made new records. The market is expected to rise further due to the Fed's decision, but if there is no reduction, there may be a decline.
Fed's big decision: Challenges and expectations
This decision of the Fed will focus on the weakness of the labor market. In August, the US inflation rate (CPI) saw pressure in sectors such as food, vehicles and household goods. Prices of coffee, beef and vegetables rose, while car parts, furniture and hardware also became expensive. Trump's new "reciprocal" tariff policy increased tariff earnings to a record $29.5 billion. Its effect has also been seen on US inflation.
In June, the Fed had projected two cuts for 2025, but seven members said there would be no cuts. Powell said, "There has been no decision on September." The weakness of the labor market cannot be ignored. Unemployment claims reached a four-year high. Payrolls increased by only 22,000 in August and 1 million fewer jobs were created in the 12 months to March 2025 than the government revision. Powell will have to strike a balance: Too slow a cut will have a bad effect on the labor market, while too hasty cuts can increase inflation. On Tuesday, August retail sales data and weekly unemployment claims will be important. Housing loan rates are at 6.35% after the biggest weekly decline in a year.
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