ASX 200 off to the races amid 2024 Fed rate cut hopes

The S&P/ASX 200 Index (ASX: XJO) is leaping higher on Thursday, up 0.9% in late morning trade.

The Aussie benchmark index is joining in the overnight US stock market rally.

Spurred by hopes of three coming interest rate cuts from the US Federal Reserve, the S&P 500 Index (SP: .INX) closed up 0.9%, marking yet another new all-time high.

Tech stocks continued their bull run as well, with the Nasdaq Composite Index (NASDAQ: .IXIC) gaining 1.3% overnight.

We’re seeing a similar moment here in Australia, with the S&P/ASX All Technology Index (ASX: XTX) up 1.1%, outpacing the ASX 200.

This comes on the heels of the US Federal Open Market Committee (FOMC) meeting.

Here’s what we know.

ASX 200 investors buoyed by US interest rate cut hopes

As widely expected, there was no interest rate cut from the Fed. The US benchmark rate remained unchanged in the range of 5.25% to 5.50%.

And Fed chair Jerome Powell may have held back an even stronger rally in US stocks and the ASX 200 by stressing that the central bank is still awaiting concrete evidence that inflation in the world’s biggest economy is retracing to its 2% target.

But speaking to the media after the Fed’s interest rate decision was announced, Powell said it was likely the bank would cut rates “at some point this year”.

Addressing the confidence the central bank needs that inflation is on its way back to 2%, Powell said (quoted by Bloomberg), “It is still likely in most people’s view that we will achieve that confidence and there will be rate cuts.”

Commenting on the outlook for Fed interest rate cuts that could offer further tailwinds for the ASX 200, the economics team at Commonwealth Bank of Australia (ASX: CBA) said (courtesy of The Australian Financial Review):

Resilient economic conditions mean we now expect the FOMC to start its rate cut cycle in July rather than in May. We now expect the FOMC to cut the funds rate by only 75 basis points (ie. three 25 basis point cuts) to 4.75% by the end of 2024.

However, we expect an extended rate cut cycle in 2025 until the funds rate reaches 3%. At 3%, the funds rate would be at the top end of the range of estimates of the ‘neutral interest rate’.

With the Reserve Bank of Australia (RBA) also having given the ASX 200 a boost this week amid signs that interest rates have likely topped out, it’s looking like more of a question of ‘when’ rather than ‘if’ the central banks will begin their easing cycle in 2024.

The post ASX 200 off to the races amid 2024 Fed rate cut hopes appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• ASX 200 lifts as RBA keeps interest rates steady

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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