Fed worried about growth, trying to keep statements neutral: Hui

Federal Open Market Committee (FOMC) statement released on Wednesday had a neutral tone, carefully drawing a line between dovish and hawkish, says Ian Hui, Global Market Strategist of JP Morgan Asset Management. Speaking to CNBC-TV18, Hui says the Fed will closely monitor the US economic trend and will look for market stability. He is of the view that the monetary policy regulator is worried about growth and is likely to raise rates twice this year. Talking about the markets, he says January equity selling was overdone. He prefers the European market over US and Japan among developed markets as he believes it has more growth potential. On the India story, Hui says it will remain unaffected by the commodity story and will be a beneficiary of oil prices, adding, fiscal and deficit problems will be helped by oil prices going forward. India is going through a cyclical downturn and not a structural downturn, he adds. Below is the transcript of Ian Hui’s interview with Latha Venkatesh on CNBC-TV18.Q: The US markets tanked after the Federal Open Market Committee (FOMC) statement. What was so bad about it?A: Yesterday, or early today, this morning, we had the FOMC statement. I did think or how US at least thinks that it was not that bad. It did not take the March rate increase off the table at least. They did make several comments that were of note, below the market situation improve further, they did mention that they will still closely monitor global economic and financial developments. So, that means that they will keep an eye on how the other countries markets and financial developments are going. So, I think it was a fairly neutral statement overall. A fairly carefully towing a line between a dovish and a hawkish attempt to try and reassure markets, but maybe the market probably expected certainty for either direction for a bit more.Q: Why do you say that it is not dovish? We were just putting together the additions in the statement and I will recount them to you. Growth slowed further late last year. Inventory investments slowed, inflation expected to remain low in the near-term, that sentence was not there previously. Committee will closely monitor global and financial developments to assess impact on labour market and inflation and even importantly, the statements that they dropped. Committee judges there is considerable improvement in the labout market – dropped. Reasonably confident inflation will rise to 2 percent – dropped. You will not read that as dovish? You will not read that as a Fed worried about growth?A: I do think that it is the Fed worried about growth, but I do think that it is trying to tow the line between dovish and hawkish. They tried to keep a fairly neutral statement to make sure that they did not go either way. I do believe that. Looking at what they did do and how everybody else has reacted to it, looking at what others have written though, they seem to have taken it as either not keeping the March rise off the table or totally taking the March rise off the table. At least from the market perspective, it seems that it is still probably looking at only around 1-2 rate rises this year and then I think the March rate rise is still only something like between 20 and 25 percent probability looking at the implied futures. So, overall, I would not say it is dovish or hawkish either way but, it is sort of a fairly neutral tone.For entire discussion, watch accompanying video...