Fed's Supersized Rate Cut Sends Mixed Signals Across Markets

Major stock indexes closed with modest losses and the dollar gained after the U.S. Federal Reserve implemented a significant rate cut. The central bank lowered the overnight rate by half a percentage point to control inflation. Markets are now anticipating further cuts, and global currencies and commodities responded with mixed reactions.

Major stock indexes ended with modest losses, and the dollar gained ground during choppy trading on Wednesday following the U.S. Federal Reserve's decision for a significant rate cut. The central bank reduced the overnight rate by half a percentage point, exceeding the customary quarter-point adjustment, citing increased confidence in taming inflation to its 2% annual target.

The lowered rate, which influences interbank rates and consumer interest rates, now stands at 4.75%-5.00%, aligning with the lower end of market expectations. The S&P 500 initially rose by 1% post-announcement but later dipped to close down 0.29% at 5,618.26. The Dow Jones and Nasdaq Composite also saw slight declines, closing at 41,503.10 and 17,573.30, respectively.

Market attention swiftly shifted to future Federal Reserve actions aimed at maintaining maximum employment and stable prices. Chair Jerome Powell reassured there were no recession signs, highlighting robust growth, reduced inflation, and a strong labor market. Markets now predict another rate cut at the November meeting, while global currencies and commodities showed varied responses, with Yen and Sterling strengthening and Gold and Oil prices declining.

(With inputs from agencies.)