The Fed Is Easing Up And The Stock Markets Are Booming!

The Fed has just marked a decisive turning point in its monetary policy, triggering a real shockwave in the European markets. After months of tightening, the American institution has decided to ease the pressure, and the result was immediate: European stock markets soared. A palpable relief spread across financial markets, giving a fresh boost to indexes. But this decision comes in a broader context of global economic tensions, where every move by the Fed is closely scrutinized.

A decisive turn by the Fed propels Europe into the green

The much-awaited moment for investors has finally arrived: the Fed has eased up. After a cycle of eleven consecutive hikes of its key rate, the American central bank has opted for a 0.5 percentage point cut.

A strong move that immediately reassured European markets, which posted impressive gains from the opening.

The CAC 40 in Paris rose by 2.07%, Milan gained 1.02%, and London saw its index increase by 1.09%. But it was undoubtedly the German Dax index that stole the show, crossing the symbolic 19,000-point mark to reach a historic high.

This decision marks a crucial turning point for financial markets. Investors, long worried about runaway inflation and geopolitical tensions, finally breathed a sigh of relief. The Fed has not only eased its policy, but Jerome Powell, its president, adopted a measured tone, specifying that this easing could be temporary.

This caution leaves the door open to future adjustments, which reassures investors even more, as they now know the Fed will navigate with care.

This rate cut comes at a time when U.S. economic indicators were showing signs of slowing down.

By easing the pressure, the Fed hopes to strike a delicate balance between supporting employment and controlling inflation. And even though European markets reacted enthusiastically, caution remains necessary, especially on Wall Street, where the reaction was more mixed.

All eyes on the Bank of England

While the Fed has chosen easing, the Bank of England (BoE) is taking a very different approach.

This Thursday, it left its key rate unchanged at 5%, marking a pause in its rate-cutting cycle. A decision that might seem contrary to the Fed’s, but which is explained by the still fragile inflationary context in the United Kingdom.

British inflation remained at 2.2% in August, close to the BoE’s target, but tensions persist.

Governor Andrew Bailey reminded that while rate cuts are envisioned in the medium term, it is essential not to rush things.

A delicate balance must be struck between supporting growth and controlling inflation, especially as energy prices are not slowing as quickly as they did last year.

For European markets, the stability of British rates is good news, as it holds out hope for a gradual return to more favorable monetary conditions.

But the BoE’s caution contrasts with the Fed’s boldness, and this could introduce some volatility in the coming weeks, particularly on London financial markets.

Investors will also be closely watching the future decisions of the Bank of England, whose November meeting could mark a turning point. If inflationary pressures continue to ease, a new rate cut could be considered. However, it will all depend on the economic indicators to come, and markets will remain on high alert.