Dwindling hopes of 50 bps Fed rate cut may push rupee to all-time low

Although the Federal Reserve's decision regarding interest rates is yet to be confirmed, there is widespread belief that a rate cut is imminent. Now the central question is whether the cut will be 25 basis points (bps) or a more substantial 50 bps.

Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Shares and Stock Brokers, believes that a 50 bps rate cut, while possible, is unlikely. He told Mint, “While some recent data, particularly related to the labor market, has underperformed expectations, it’s not yet enough to suggest a significant deterioration in economic conditions.”

Hajra points out that although the market anticipates a front-loaded cut, the Fed seems to favour a more gradual approach. “A 25 bps cut could disappoint some market participants,” Hajra notes, but a 50 bps cut could signal deeper concerns about the economy, potentially causing negative reactions.