The Federal Reserve has officially launched the long-awaited rate-cut cycle, lowering interest rates by 50 basis points, the first cut since 2020 pandemic panic. This decision reflects the Fed's growing confidence in inflation moving towards its 2% target, with core PCE expected to be slower. More importantly, The FOMC has revised its projections, now forecasting the benchmark rate to fall to 4.4% in 2024 and 3.4% in 2025, an aggressive easing stance than previously projected. GDP growth forecasts remain relatively stable at around 2% through 2027, while Fed Chairman Jerome Powell downplayed recession concerns, citing solid growth, cooling inflation, and the unemployment rate remaining low as positive indicators. Now BoE and BoJ rate decisions come into focus to see how other central banks will react to the Fed's decision.

EQUITY
U.S. equity closed lower on Wednesday after the cut, with major indexes falling 0.3%. Investors grappled with the positive aspects of lower interest rates against concerns about why a larger cut was deemed necessary, as most economists expected a smaller 25 bps. Sector performance varied, with utilities experiencing the steepest decline while energy gains, and the U.S. 10-year Treasury yield rose to 3.73% post-cut.

GOLD

Gold touched $2,600 per ounce and dipped following the Federal Reserve's decision, although price is steadily climbing on Thursday. Disregarding this short-term volatility, gold has maintained a strong performance, boasting a 25% gain for the year and outperforming the S&P 500 index. The risk of reinflation will bring about more interest in gold as a store of value if this rate cut cycle goes faster than it should.

OIL
The crude benchmark is on a relentless rally after the cut has pushed USOIL to above 70 once again since early September. Geopolitical tensions in the Middle East further supported price as it raised fears of potential supply disruptions. Despite a larger drawdown in U.S. crude inventories, Brent crude prices remain near yearly lows, with analysts projecting potential further weakness in 2025.

CURRENCY

The U.S. dollar index fell to levels seen before rate cut that gave it a short-lived rally that rebound from a one-year low. Fed Chair Powell indicated that the central bank was not returning to ultra-low rates and that further cuts were likely, although that is not enough to support falling dollar. Meanwhile, the British pound gained ahead of the Bank of England's policy meeting, with expectations of rates being held at 5%, while the euro also strengthened against the dollar.