Fed interest rate cut well received by global markets: Mitul Kotecha

Global stock markets rallied after a 25 basis point rate cut by the US Federal Reserve, although analysts warn that future moves by the Fed remain uncertain. Treasury yields fell, the dollar weakened, stocks rose and gold gained.Mixed signals from the Fed

Mitul Kotecha of Barclays, in an interview with ET Now, noted the Fed’s divided stance: “The mood was very divided. Some members did not even vote for a cut. The dot chart shows only one cut next year, although we think there is a chance of two. The markets reacted positively: Treasury yields were lower, the dollar softer, stocks higher and gold prices rose. Powell’s comments show that the Fed will remain dependent on the data.”

Liquidity injection boosts sentiment
The Fed also announced a $40 billion monthly purchase of Treasuries to manage year-end liquidity pressures. “It’s a positive surprise. This will help finance the pressure and support market sentiment. It’s not quantitative easing, just liquidity management, but the markets have responded well.”

Looking ahead
Analysts are keeping an eye on the potential new Fed chairman and U.S. debt dynamics: “After 50 basis points of cuts, we expect rates to settle at the terminal rate. A new governor could influence policy, but the Fed board is still voting collectively. We are not concerned about debt dynamics; 10-year yields should be around 4%, and fiscal pressures appear manageable,” he said.

Investors will closely monitor the Fed’s data-driven approach and liquidity measures as the interest rate outlook evolves in 2026.