Has the US Federal Reserve chairman Jerome Powell disappointed the Indian markets? Going by the fact that experts were looking forward to three rate cuts this year, he might have done that on the night of June 12.
While addressing the media after a two-day Federal Open Market Committee (FOMC) meeting, the Fed chairman said that rate cuts will happen only once this year. Not only did he say that policy cut will take place once this year but might be pushed back to December 2024.
“This is indeed a disappointment for those who were seeking multiple (at least three-fold) adjustments. Just a single cut will not help those who were looking for higher inflows into India,” said Nilanjan Dey, director, Wishlist Capital.
The bottomline is: A rate cut by the Fed is expected to benefit the Indian markets, especially the equity market since it will unleash a tide of dollars into the Indian markets.
The Indian equity markets has provided excellent returns when compared to the emerging markets. And a rate cut at this juncture could have pushed the market indices to even newer highs, lending more momentum to the continuing bull run.
Though the inflation came down at a rate that was slower than expected, Powell clarified that a rate cut is not only guided by inflation data.
“We don’t make decisions about future meetings until we get there,” he said. “Really, it’s going to be not just the inflation readings. It’s going to be the totality of the data, what’s happening in the labor market, what’s happening with the balance of risks, what’s happening with the forecasts, what’s happening with growth. You’re looking at all of that,” Powel remarked.
Incidentally, a few days ago, US hiring data pertaining to May was unexpectedly better, which strengthened the dollar and provided strong indications that a rate cut might not take place. The US central bank has a long-term target of maintaining consumer price inflation at 2%. The target of the RBI is to maintain it at 4%.
The US central bank has revised it earlier stance and shifted to only one rate cut this year. Three rate cuts could have unleashed a tide of FPI investment in the Indian markets. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
