Equity markets predominantly ascend on expectations of further interest rate reductions by the Federal Reserve
In a move aimed at supporting stocks, economic growth, and the job market, the US Federal Reserve (Fed) announced a quarter-point rate cut on Wednesday, 2025. The decision, as expected by the market, came amidst a flurry of significant economic developments.
Following the announcement, Wall Street stocks advanced early Thursday, with the Dow Jones Industrial Average slipping 0.1%. However, the S&P 500 increased 0.5%, and the Nasdaq Composite Index rose 0.9%. Notably, tech shares, including Intel and the Nasdaq Composite Index, also saw a surge. Intel's shares jumped more than 25% following an announcement that US chip giant Nvidia would invest $5 billion in Intel.
The rate cut was not the only news that impacted the market. Initial jobless claims data were lower than analysts expected, but they did not significantly impact the market. Meanwhile, a legal battle regarding potential allegations of mortgage rates against a Fed governor, Lisa Cook, could have prevented her from attending the latest rate meeting. However, she was allowed to remain in place for now.
The Fed's decision to lower interest rates also signaled that more rate reductions are likely in the future. This prospect was further emphasised by Fed officials' suggestions of additional rate cuts for 2025.
In a bid to steer the country's monetary policy, President Donald Trump appointed a key economic aide to the Fed's leadership following an early resignation. The new economic advisor, Stephen Miran, has been confirmed as a member of the Fed Board of Governors. As a leading economic expert formerly advising the White House, Miran's appointment may significantly influence U.S. monetary policy.
Despite these developments, the Fed rate cut announcement did not pass without controversy. Cook, who faced allegations of mortgage rates, could potentially have been fired by Trump. However, the ongoing legal battle surrounding these allegations has yet to be resolved.
In conclusion, the Fed's rate cut on 2025 has provided a boost to stocks and the economy, with the S&P 500 and Nasdaq Composite Index seeing notable increases. The appointment of Stephen Miran as a member of the Fed Board of Governors may also signal a significant shift in U.S. monetary policy. As the legal battle surrounding Lisa Cook continues, the future of the Fed's leadership and monetary policy remains uncertain.
