Strong dollar and the unwinding of quantitative easing are equivalent to 1 percentage point rate rise
On the market reaction to the Fed rate hike, Manishi Raychaudhuri, Asian Equity Strategist- Asia Pacific at BNP Paribas believes that the equity and bond markets showed a relief rally.
The real reason for trying to slow the economy is to ensure that wages do not rise rapidly. That is why the state of the labour market is key to US monetary policy
For the RBI, it’s easier to tackle inflation through policy rate hikes than through the exchange rate channel. The experience in 2013 shows that excessive intervention does not help when the tide is against the domestic markets.
The Federal Open Market Committee “is strongly committed to returning inflation to its 2% objective,” it said in a statement released in Washington, repeating previous language that it’s “highly attentive to inflation risks.”
Since October 2021 till date, foreign institutional investors sold over $34.41 billion while in the year so far they have sold $29.64 billion of Indian equities.
At 9.10 am, rupee was trading at 80.01 a dollar, down 0.03% from its previous close. It opened at 79.99 and touched a fresh record low of 80.02.
With commodity prices easing and rural sentiment turning positive, the Nifty Midcap and Nifty Smallcap indices have seen a rally. The indices have risen nearly 7 percent and 4 percent, respectively, in July 2022.
The outcome of elevated inflation is erosion in the value of an economy’s exchange rate. If a country’s inflation is higher relative to its trading partners’, its currency has to adjust down.
Interest rate hikes are a blunt tool to manage supply-side inflation and India’s growth could be weighed down by hardening financial conditions, Upasna Bhardwaj said
The Fed’s own members expect interest rates to rise throughout this year and then remain flat for entirety of 2023 followed by some cuts in 2024. But, the market now believes that the Fed would be forced to cut rates as soon as March 2023.
At 9.22am, the 10 year bond yield was trading at 7.36% versus its previous close of 7.395%. Bond yield and prices move in opposite directions.
The BoK is one of many central banks now feeling the pressure from an aggressive interest rate hiking campaign from the U.S. Federal Reserve
US Treasuries are starting to flag a recession that looks to be unavoidable
An external member of the Monetary Policy Committee (MPC), Jayanth Varma, said the time was “ripe” to provide projections for the future path of the policy rate, according to the minutes of the panel’s latest meeting.
Stocks rebounded this week as financial markets have been roiled over worries that rapid rate hikes by the Fed to rein in 40-year-high inflation could cause a recession
The RBI’s analysis shows that consumer inflation exceeding 6 percent is negative for growth, the governor said.
Jerome Powell, the chairman of the Federal Reserve, reaffirmed the Fed's commitment on Wednesday to raising interest rates to levels high enough to reduce inflation. This pledge has fueled worries that the central bank's efforts to combat rising prices could send the economy into recession.
The MPC has accumulated enough experience and the RBI has evolved into a mature inflation-targeting central bank, Varma said during the June 6-8 meeting
The Bank for International Settlements says, "in an unequal society, income is concentrated in the hands of a few, whose consumption is high and largely insensitive to interest rate". That could limit the effectiveness of monetary policy
The projections of US GDP growth by the New York Fed model are much lower than those of the Federal Open Markets Committee
The euro was little moved after French President Emmanuel Macron lost control of the National Assembly in legislative elections on Sunday, a major setback that could throw the country into political paralysis.
The BoE raised its benchmark interest rate to 1.25% on Thursday - the highest since January 2009. While its move was more gradual than other central banks, the BoE said it was ready to act "forcefully" if needed to tackle dangers from inflation.
The government is committed to ensure that capital expenditure continues in such a way that growth impulse that we have regained after the third wave is not surrendered, V Anantha Nageswaran said
Chair Jay Powell seems to understand that public perception matters but shaping it may be beyond his control