Global Market Update: Fed Rate Cut and UK Interest Rates Freeze

As the stock market opens on Thursday, several key issues are making headlines. We summarize the major developments that are expected to impact the global economy.

Impact of Fed Rate Cut

The U.S. Federal Reserve (Fed) has taken a significant step to promote the recovery of the U.S. economy by cutting interest rates by 50 basis points (0.5 percentage points). Fed Chairman Jerome Powell stated that this measure would help prevent a recession, but also emphasized the need for caution to avoid making this rate cut a continuous trend. Meanwhile, Fed Governor Michelle Bowman expressed a different opinion, arguing for a 25 basis points (0.25 percentage points) cut. The Fed’s decision and its determination to preemptively respond to the economic slowdown are expected to affect the policy outlook of central banks worldwide.

UK Interest Rates Freeze

The Bank of England has decided to keep interest rates on hold in September, following a rate cut in August. This decision contrasts with the Federal Reserve’s significant rate cut a day earlier. The Bank of England’s Monetary Policy Committee (MPC) stated that “gradual monetary easing” was appropriate, given the high service sector inflation. While the committee confirmed inflation figures were close to its 2% target, it noted mixed economic data, including a 5.6% increase in prices in the services sector, which accounts for about 80% of the UK economy, in August.

Investor Response Positive

Stock index futures on the New York Stock Exchange rose sharply on Thursday after the Federal Reserve announced a rate cut. Investors responded positively to the Fed’s decision to cut rates. Semiconductor giants Nvidia and AMD each rose more than 3%, while Micron Technology rose more than 2%. Regional bank stocks also rose, with New York Community Bancorp up 3%. According to Jeremy Siegel, professor emeritus at the Wharton School of the University of Pennsylvania, “This is the best news we’ve heard from the Fed in years. This is great news for the markets and the economy.”

Stock Index Futures Surge

According to CNBC data, Dow Jones futures rose 1.26%, Nasdaq futures rose 2.22%, and S&P 500 futures rose 1.53%. Additionally, the US dollar index rose 0.07% to 100.67, the yield on the 10-year Treasury note rose 0.9 basis points to 3.714%, and WTI futures rose 0.80% to $71.48 per barrel.

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