Discussing the global markets, Benoit Anne, Managing Director, Head of EM Strategy, Societe Generale, said there are lot of pressure ahead of the FOMC meet simply because a number of global investors are concerned about a potential change in rates.
The US Federal Reserve began its two-day policy meeting on Tuesday. While the Fed has said that it may not raise until 2015, but post the recent upbeat US economic data, there are expectations that the central bank may need to move on rate sooner than anticipated earlier.
In an interview to CNBC-TV18, Anne said that he believes the stimulus will not be removed and the message “will continue to be on the relatively dovish side and that will ultimately be positive for the risky assets, including the global emerging markets assets.”
Below is the transcript of Benoit Anne’s interview with CNBC-TV18\\'s Reema Tendulkar and Sumaira Abidi.Reema: All eyes will be on the Federal Open Market Committee (FOMC) outcome tomorrow night. What are the expectations currently baked into the global market in terms of language in particular?A: Yes, it is very interesting. Of course a lot of pressure and a lot of market stress ahead of that event simply because the number of global investors were concerned about a potential change in language and everybody is focussing on this phrase considerable time that may or may not be removed, I believe it will not be removed and therefore the message will continue to be on relatively dovish and that will ultimately be positive for risky assets including global emerging markets assets.
Sumaira: On the other side of the globe it looks like the starting of a QE in China at least. There are some reports from the media that are indicating that there has been a large injection of liquidity in some of the larger banks in China. How do you view this move and do you think this could be the first step in a larger liquidity program that China could be planning?A: Yes, this is a very good signal. We are still in the situation where we want to see an easing policy signal and proactive central banks. That to me is very good news. So now we have China and we have the European Central Bank (ECB) that really made a considerable effort well beyond expectations in my view.So we have got two major central banks that are switching to further easing and we have the Fed that is, I wouldn’t call that tightening much as yet, but the Fed is really slowly moving towards the exit but clearly not as fast as some people think, so overall a pretty positive environment.Reema: You indicated in your first answer that you expect the Fed to maintain or retain its language of considerable time with respect to this low interest rates by the ECB. So if there is, what could be the extent of a positive reaction if it plays out like that?A: A relief rally in the near term is quite likely in risky assets. So global equities and, in my words I robustly watch emerging markets (EM) currencies and Asia FX is very well positioned to take advantage of that.
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