On December 18, the US Federal Reserve (Fed) decided to cut interest rates for the third consecutive time since September 2024, reducing 0.25%, lowering the US Central Bank's key lending rate to 4.25 - 4.5%, the lowest level in two years.
Fed Chairman Jerome Powell speaks at a press conference in Washington on December 18 - Photo: Reuters
The Fed's move comes amid uncertainty about inflation and President-elect Donald Trump's economic plans.
Gold, stocks plummet
Over the past two years, the Fed has effectively controlled inflation by raising interest rates without significantly affecting growth or employment. More recently, the Fed has moved to cut interest rates to boost economic demand and support the labor market.
But after cutting interest rates for the third time, the Fed signaled that it would slow the pace of cuts in 2025, raising concerns about persistent inflation. The message sent the dollar soaring to a more than two-year high on December 19, while global stocks plunged, reflecting the uncertainty of the Fed's signal.
Asian currencies including the Chinese yuan and the Japanese yen fell sharply against the dollar, while the South Korean won fell to a 15-year low. Stock indexes in the region opened lower on Monday, following a sharp decline in U.S. stocks the day before.
US stocks had one of their worst days of the year on December 18. The S&P 500 fell 2.9% to 5,872 points, the Dow Jones fell 2.58% to 42,326 points and the Nasdaq Composite fell 3.6% to 19,392 points. According to Reuters, the world spot gold price fell 2.1% to $2,589.91/ounce on December 18, the lowest level since November 18.
Fed Chairman Jerome Powell said further rate cuts would depend on progress in reducing inflation, which remains high, suggesting policymakers are starting to consider sweeping economic changes under President Trump.
“We’re in a good place, but I think we’re going to enter a new phase from here and we’re going to be cautious about further rate cuts,” Powell said. The cautious call sent shockwaves through Wall Street, sending stocks tumbling and bond yields soaring.
The Fed’s message suggests that U.S. interest rates could stay high for longer, drawing capital away from other markets. That’s a blow to Asian and emerging markets where investors expect rates to fall soon.
It's too early to tell.
The Fed raised interest rates sharply in 2022 and 2023 to control high inflation, but has been cutting since September, starting with a 50 basis point (0.5%) cut as inflation cools. The US central bank called this a policy "recalibration", demonstrating its success in bringing inflation down from its 2022 peak.
Under the new forecasts, US officials expect the core PCE price index (personal consumption expenditures, excluding food and energy) to rise 2.5% in 2025, down from 2.8% this year. However, this figure is still significantly higher than the Fed's 2% target.
The Fed’s latest rate cut comes just weeks before Mr Trump returns to the White House, bringing with him promises of higher tariffs on goods, deportations of immigrants and tax and regulatory cuts.
Economists warn that these policies could increase inflation and hurt economic growth, according to a Financial Times poll. The Congressional Budget Office (CBO) also predicted that higher tariffs would push up inflation and slow growth.
While Mr. Powell expressed confidence that price pressures would continue to ease, he also acknowledged that policymakers and Fed members had begun to weigh the impact of Mr. Trump’s promises — including tariff hikes, tax cuts and tighter immigration policies — on the economic outlook.
However, Mr. Powell noted: "It is too early to draw any conclusions. We do not know which items will be taxed, the countries affected, the timing of the tariffs or the specific tariffs. It is also unclear whether there will be retaliatory tariffs. Currently, the Federal Open Market Committee (FOMC) is discussing scenarios and considering how tariffs may affect inflation."
Will there be only 2 cuts in 2025?
The Fed now expects just two more rate cuts in 2025, down from its original projection of four. “With the risk of inflation rising again due to trade tariffs and a slowdown in immigration that is reducing pressure on the labor market, market expectations of just two more rate cuts in 2025 now look reasonable,” said Jean Boivin, director of the BlackRock Investment Institute.
SJC gold bar price evaporates 1 million VND/tael
Domestic gold prices on December 19 plummeted after news of the Fed lowering interest rates - Photo: THANH HIEP
World gold prices fluctuated strongly after the Fed cut interest rates by 0.25%. Initially, the price dropped nearly 60 USD/ounce, from 2,650 to 2,590 USD/ounce, but then recovered to 2,624.9 USD/ounce at the end of December 19, an increase of 40 USD/ounce. Converted according to the bank exchange rate, the gold price reached about 80.7 million VND/tael.
Domestically, gold prices also plummeted. SJC Company listed the selling price of SJC gold bars on December 19 at VND84.1 million/tael, down VND1 million/tael compared to December 18. The buying price also decreased accordingly, to VND82.1 million/tael. This price remained unchanged until the end of the day.
Meanwhile, the price of 9999 gold rings also plummeted from VND84.5 million/tael to VND83.8 million/tael, equivalent to a decrease of VND700,000, while the buying price decreased by VND900,000/tael. However, by the end of December 19, the price of 9999 gold rings increased again by VND100,000/tael.
Several other gold trading enterprises also simultaneously reduced the buying and selling price of gold rings. Bao Tin Minh Chau Company Limited reduced the selling price of gold rings from VND85.03 million/tael to VND84.03 million/tael, equivalent to a decrease of VND1 million/tael; the buying price was VND82.83 million/tael, equivalent to a decrease of VND900,000/tael.
By the end of the day, the selling price of gold rings at Bao Tin Minh Chau increased slightly by VND70,000/tael, to VND84.1 million/tael (selling) and VND83.1 million/tael (buying). DOJI Company listed the price of gold rings at the end of the day on December 19 at VND84.05 million/tael, the buying price was VND83.05 million/tael.
At the current price, the price of SJC gold bars is 3.4 million VND/tael higher than the world gold price, while the price of gold rings is 3.2 million VND/tael higher.
Vietnamese stocks "dyed red" after information from the Fed
Although the Fed has cut interest rates by 0.25%, it has also signaled that it will reduce the speed and frequency of monetary easing next year. This has caused Asian stock markets to react negatively, and Vietnam is no exception.
Opening the morning session on December 19, VN-Index dropped nearly 12 points, then the amplitude narrowed towards noon. In the afternoon session, buying and selling forces gradually balanced, and panic selling did not appear. Closing, VN-Index fell to 1,254.67 points - down more than 11 points compared to the previous day and this was also the sharpest decrease in the past month.
Statistics at the end of the session showed that all three exchanges had 441 stocks decreasing in price, counterbalancing 243 stocks increasing in price, with nearly 900 stocks remaining unchanged. On HoSE alone, the number of stocks losing points was 4.3 times higher than the number of stocks increasing in price, causing the market breadth to tilt towards the negative side.
In this session, foreign investors net sold more than 500 billion VND in the whole market, focusing on securities and banking stocks such as SSI, VPB of VPBank, VCB of Vietcombank, VCI of Vietcap, BID of BIDV and some other real estate and steel codes such as PDT of Phat Dat Real Estate, HPG of Hoa Phat.
Given the developments in the stock market, analysts at Vietcombank Securities (VCBS) recommend that investors should not panic and sell off stocks at low prices, but should observe market developments in the coming sessions.
In addition, experts also believe that investors can consider increasing the proportion of stocks with good fundamentals for long-term investment portfolios. Although the probability of fluctuations still exists, the appearance of bottom-fishing demand shows that the market will soon balance and recover at the support zone of 1,250 points.
Source: https://tuoitre.vn/chao-dao-vi-fed-20241220080124248.htm
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