Moneycontrol Pro Panorama | Fed bites the bullet, a cue for other central banks?

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The verdict is clear. The US Federal Reserve is pivoting from an ultra-easy monetary policy adopted since the pandemic outbreak to a hawkish stance. It decided to accelerate the pace of tapering bond purchases. Further, the Fed’s dot plot points to three rate hikes in calendar year 2022.

The shift away from near zero rates for nearly two years reflects a sense of urgency, which is not surprising, given the multi-decadal high inflationary pressures in the US economy. However, this article explains why the rapid tapering has also to do with factors other than inflation such as a sustained demand environment and labour market tightness.

Importantly, the Fed’s directional shift raises many questions. Will it trigger a reactionary taper tantrum like what we witnessed in 2013? Will it set the stage for other central banks across the globe to follow suit? Of course, the final call taken in each country will depend on the magnitude of scarring of various economic activities from the pandemic, the kind of inflation and the slack in the economy. This piece explains reasons that call for different monetary policy responses in different countries.

Equity, bond and money markets have been anticipating this move of the US Fed and turned choppy over the last month. Analysts foresee this to continue for some time. Core inflation in most economies has remained sticky, with supply chain disruptions taking longer-than-expected to normalise. Then, there is the lurking fear of risks from spread of the Omicron variant of the virus on economic growth.

Investors may be in for more surprises as policy announcements from the European Central Bank, the Bank of England and the Bank of Japan are to follow soon.

Some investing insights on three companies from our research team

ITC: Wait gets a bit longer for value unlocking

Aditya Birla Fashion and Retail: Acquisition of Reebok India rights value-accretive

Supriya Lifescience IPO: A play on lower supply-chain risk for APIsWhat else are we reading?

PCA can be an early warning system to spot trouble in NBFCs

Chart of the Day | Listed companies are growing ahead of the rest of the economy, but for how long?

Elon Musk: Interview with FT’s Person of the Year (republished from the FT)

Crypto Learn | How to buy Bitcoin and other cryptocurrencies in India?

Why India is unable to attract global currency traders

Soaring input costs raise risks to solar project returns

Election freebies do poor no good, only harm the system

Picks from our Technical Analysts

Trident, Crompton Greaves, Bharat Electronics and HPCL(These are published every trading day before markets open and can be read on the app)

Vatsala Kamat
Moneycontrol Pro