September 30, 2024
US Federal Reserve Cuts Interest Rates by 50 bps
Fed's Rate Cut Opens Doors for Emerging Markets as Investors Seek Higher Yields Abroad
The US Federal Reserve’s decisions on interest rates have a significant impact on global financial markets. On September 18, the Federal Reserve cut interest rates by 50 basis points (bps) in its ongoing fight against inflation.
For emerging markets like Kenya, these Fed rate cuts present a major opportunity. When the Fed lowers interest rates, it directs global investors to seek higher-yielding assets in foreign markets. This happens because US-based investments offer lower returns following a rate cut, making emerging markets more attractive.
On the other hand, when the Fed raises interest rates, the reverse happens. Investor capital flows back into the US as domestic assets become more appealing due to higher returns, reducing the inflow of investment in foreign markets.
