MNS Pro
MONEY NOT SLEEP
  • India Market
  • International Market
  • Crypto
  • International News
  • हिंदी मे
No Result
View All Result
  • India Market
  • International Market
  • Crypto
  • International News
  • हिंदी मे
No Result
View All Result
MONEY NOT SLEEP
MNS Pro
Home Editorial

The influence of the US Fed rate decision on the Indian market is explained

moneynotsleep by moneynotsleep
December 16, 2022
in Editorial, India Market, India News
0
US Fed Rates
0
SHARES
2
VIEWS

Just a few weeks ago, the global market celebrated the prospect of the US Fed Rate interest slowing.

Fed Chair Jerome Powell agreed that lower interest rate rises were anticipated, but he cautioned that monetary policy might stay tight until unambiguous evidence of considerable inflation reduction is discernible.

However, this confidence quickly faded as good macroeconomic data in the United States reminded the market that the US fed interest rate can be significant.

At the moment, the US Federal Reserve is the most powerful central bank in the world. Its policy actions have repercussions all across the globe. Forget about US fed rate rises; even a nudge in the direction of a rate hike disturbs markets.

Investors may be disappointed that by swiftly raising rates, the Fed is increasing the chance of a recession and breaking market confidence. But the Fed has a duty to do: keep inflation under control, and raising interest rates is its most effective weapon against rising inflation.

What can we anticipate this time?

The decision of the US FOMC meeting is anticipated on December 14, and after hiking US fed rate by 75 basis points at each of the last four sessions, a 50 basis point boost is expected this time.

Reuters surveyed economists unanimously predicted that the US Federal Reserve will raise federal reserve interest rates by 50 basis points on December 14.

Why is the US Federal Reserve raising interest rates?

After the Covid-19 epidemic rocked the world, the US Fed and other central banks dropped key lending rates to historic lows to provide enough liquidity in their financial systems while economic activity was hampered owing to Covid restrictions.

Before the epidemic could stop and central banks began to wind down surplus money, the Ukraine war broke out, sending commodities prices skyrocketing owing to a demand-supply mismatch. In the United States and portions of Europe, inflation has reached multi-decade highs. In India, retail inflation, as measured by the Consumer Price Index (CPI), has been above 6% for the previous ten months, above the top level of the RBI’s tolerance zone.

Inflation, as we all know, is simply an increase in the prices of goods and services. When inflation grows, consumers are forced to spend more money. This reduces their purchasing power and reduces demand, which in turn reduces output and economic growth.

High inflation reduces buying power, which reduces consumption, which reduces demand, which reduces output and economic development. Worse, this cycle repeats itself since a weak economy equals weak output, poor salaries, and so on. This is one of the reasons for the US fed rate increase. 

According to the IMF: “In an inflationary environment, unevenly growing prices ultimately diminish some consumers’ buying power, and this erosion of real income is the single greatest cost of inflation. Inflation can also distort buying power over time for fixed-interest rate users and payers.”

Inflation is a major concern, and it is the Fed’s obligation to manage inflation below acceptable ranges.

What does this entail for India’s economy and market?

Following a rate rise by the US Fed rate, the interest rate differential between the US and India narrows, negatively affecting currency trade. The dollar and the US government yield become more appealing in the US, and capital outflows begin in the Indian market.

Furthermore, the currency weakens, prompting the rate rise in India. If the rupee falls drastically, the RBI may be obliged to sell dollars in order to support the domestic currency. This depletes the domestic currency reserve.

The biggest shock to the market has been strong selling by overseas investors. Emerging economies often provide higher returns than established markets, but when the US fed rate rises, the amount of the gain becomes less appealing. In this situation, international investors withdraw funds from emerging economies such as India and invest in equities in the United States, which are less volatile.

What should individual investors do?

US fed rate rise is predicted, and the market may have priced it in. An indication from the Fed on the course of the rate rise will set the tone for the market.

Even analysts and experts have warned that the United States may enter a recession in 2023, and the Fed may continue to raise rates until it is persuaded that inflation has fallen and will not rise again.

This will most certainly keep the market volatile. Domestic-centric industries are less likely to be damaged by a US recession, therefore retail investors may gamble on them. Experts advise investing for the long term in quality equities, adding on dips, and adjusting portfolios based on market conditions.

Related

Previous Post

According to Nirmala Sitharaman, the opposition raises objections out of jealousy for India’s fastest growing economy

Next Post

Paytm share buyback worth ₹850 cr via open market. 10 key pointers

moneynotsleep

moneynotsleep

Next Post
paytm share buyback

Paytm share buyback worth ₹850 cr via open market. 10 key pointers

Stay Connected test

  • 23.7k Followers
  • 99 Subscribers
  • Trending
  • Comments
  • Latest
Stock market loopholes in India

8 Major Stock Market Loopholes In India

December 3, 2022
New York Stock Exchange (NYSE), USA

Top 10 biggest stock exchanges in the world 2022

November 26, 2022
Top Stock Market Investors In India 2022 And Their Portfolios

Top Stock Market Investors In India 2022 And Their Portfolios

December 1, 2022
stocks for swing trading

How To Select Stocks For Swing Trading

November 30, 2022
New York Stock Exchange (NYSE), USA

Top 10 biggest stock exchanges in the world 2022

3

Amazon is the latest company to join the wave of layoffs, following Meta and Twitter

2
TATA TECH IPO

Tata Tech IPO Is Coming: First IPO After 18 Years

2
Union Budget 2023

Union Budget 2023: what should you anticipate

2
Adani enterprise share price

Adani enterprise share price falls as it calls off 20000 crores FPO.

February 2, 2023
Harsha Engineers International ltd

Harsha Engineers International ltd IPO stock price and latest news.

February 2, 2023
Union budget of india

Union budget of India 2023- From new income tax slabs to PAN Card, everything you need to know.

February 1, 2023
Economic Survey 2023 Highlights

Economic Survey 2023 Highlights: All you need to know 

January 31, 2023

Recent News

Adani enterprise share price

Adani enterprise share price falls as it calls off 20000 crores FPO.

February 2, 2023
Harsha Engineers International ltd

Harsha Engineers International ltd IPO stock price and latest news.

February 2, 2023
Union budget of india

Union budget of India 2023- From new income tax slabs to PAN Card, everything you need to know.

February 1, 2023
Economic Survey 2023 Highlights

Economic Survey 2023 Highlights: All you need to know 

January 31, 2023
Adani enterprise share price
India Market

Adani enterprise share price falls as it calls off 20000 crores FPO.

by moneynotsleep
February 2, 2023
0

The majority of Adani Enterprise share price fell drastically on the news of the FPO cancellation on Wednesday.

Read more
Harsha Engineers International ltd

Harsha Engineers International ltd IPO stock price and latest news.

February 2, 2023
Union budget of india

Union budget of India 2023- From new income tax slabs to PAN Card, everything you need to know.

February 1, 2023
Economic Survey 2023 Highlights

Economic Survey 2023 Highlights: All you need to know 

January 31, 2023
Adani vs Hindenburg battle continues

Adani vs Hindenburg battle continues as Adani strikes back at Hindenburg.

January 30, 2023
  • About us
  • Apply For Job
  • Contact us
  • Disclaimer
  • Privacy policy

© 2022 Moneynotsleep

No Result
View All Result

© 2022 Moneynotsleep