The US Federal Reserve cut interest rates by half a percentage point, marking the start of its first easing cycle since the pandemic, according to a statement out yesterday. The Open Market Committee’s meeting voted 11 to 1 to reduce the federal funds rate to a range of 4.75% to 5%. Additional rate adjustments will be considered by policymakers based on “incoming data, the evolving outlook, and the balance of risks,” according to their statement.

Powell says nothing is set in stone: The Fed will respond flexibly to evolving economic conditions, chair Jay Powell said at a presser after the meeting, the Financial Times reports. Powell indicated that rates are not set on a “fixed path” and that the Fed may adjust its approach if inflation remains persistent. He also emphasized the central bank’s readiness to act if unexpected weaknesses in the labor market emerge.

What to expect: The Fed’s updated projections include a further 50 bps rate cut by year end, another 100 bps in 2025, and a final 50 bps in 2026, bringing the benchmark rate to 2.75%-3%, according to its median forecast (pdf). The Fed has two meetings left this year, in November and December, implying two 25 bps rate cuts in each of the meetings.

Is the Fed playing catch-up? The Fed’s 50 bps reduction contrasts with the Fed’s assessment that the US economy is in a good place, Egyptian-American economist Mohamed El Erian said in an X post. “Today’s 50 bps move is a catch-up for not having reduced rates in July.”

Market reax: The stock market responded positively, with the S&P 500, Dow, and Nasdaq Composite all posting gains before easing to close slightly down, the Wall Street Journal reports. Treasury yields also dipped after initially rising to 3.706%, settling at 3.685%.

MARKETS THIS MORNING-

Asia-Pacific markets are also reacting positively to the start of the era of monetary easing, with Japan’s Nikkei leading gains. Hong Kong’s monetary authority followed the Fed’s lead with a 50 bps rate cut, with Hang Seng futures pointing to a flat open after markets return to trade on Thursday following a day off yesterday. Wall Street futures are also up as traders continue to weigh the Fed’s moves yesterday.

EGX30

30,342

+0.6% (YTD: +21.9%)

USD (CBE)

Buy 48.49

Sell 48.63

USD (CIB)

Buy 48.48

Sell 48.58

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

11,921

+0.3% (YTD: -0.4%)

ADX

9,423

-0.1% (YTD: -1.6%)

DFM

4,390

-0.1% (YTD: +8.1%)

S&P 500

5,618

-0.3% (YTD: +17.8%)

FTSE 100

8,254

-0.7% (YTD: +6.7%)

Euro Stoxx 50

4,835

-0.5% (YTD: +6.9%)

Brent crude

USD 73.65

-0.1%

Natural gas (Nymex)

USD 2.30

+0.5%

Gold

USD 2,598.60

+0.2%

BTC

USD 60,378.90

+0.1% (YTD: +42.7%)

THE CLOSING BELL-

The EGX30 rose 0.6% at yesterday’s close on turnover of EGP 2.9 bn (25.3% below the 90-day average). International investors were the sole net sellers. The index is up 21.9% YTD.

In the green: Ezz Steel (+9.1%), EFG Holding (+3.2%), and Beltone Holding (+2.2%).

In the red: Palm Hills Development (-2.0%), Egyptian Kuwaiti Holding -EGP (-1.2%), and Madinet Masr (-1.2%).

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