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This decision has been taken to boost the American economy and control inflation. This may also impact the Indian markets, because when America reduces interest rates, the expectation of reduction in interest rates in other countries also increases.
Analysts expect borrowing costs in the US to fall further in the coming months, but warn that Trump's impending tax cut plans, tariff hike proposals and immigration control measures could increase inflation and government borrowing. This may increase the possibility of conflict with the US central bank. Interest rates on US debt have already risen this week, reflecting those concerns.
The biggest impact of the reduction in interest rates by the Federal Reserve will be on loans. When interest rates fall, banks and financial companies can offer cheaper loans. This will directly benefit those people who want to take loan for home, car or other needs. Apart from this, companies which have heavy debt will also get relief from this decision, because their debt will become cheaper and they will be able to repay it quickly. According to experts, the IT and pharma sectors will benefit the most from the reduction in interest rates. Apart from this, banking and financial companies will also benefit from this.
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