The Federal Reserve System (US FED) is the central banking system of the United States. Its was created in 1913. With a focused view to provide the nation with a safer, more flexible, more stable monetary and financial system.
US Fed: The current target range for the US Federal Funds Rate is 5.25% – 5.50%. As of last updated on July 26, 2023. The highest level in 22 years.
Analysts view on US Fed Interest Rate and its impact on Indian Stock Market:
- Analysts in India have closed look on the upcoming US Federal Reserve meeting, to be held in September 2024, for clues about future interest rate decisions. The Fed’s actions have a significant impact on the Indian economy and financial markets.
- Currently Analyst believe that the Fed will likely keep interest rates unchanged in September, as recent data predicts that inflation may be easing.
- Analysts are closely monitoring US inflation data, as this will be a major factor in the Fed’s decision-making process. If might inflation continues to cool down, it may support the case for a pause in rate hikes.
- Analysts are expecting that if a pause in rate hikes, it would be positive for the Indian stock market, as it might slow down the pressure on foreign capital outflows and borrowing costs for Indian companies. On the other hand, if the US Fed shows a more hawkish stance, than it could generate lead to volatility in the Indian market.
On the other hand some additional considerations should also keep in view like:
- Global Economic Conditions: The global economic outlook and geopolitical tensions could also have significant impact on the Fed’s decision and, consequently, and same will impact on the Indian market.
- The Reserve Bank of India’s (RBI) monetary policy stance will also play a important role in mitigating any potential adverse effects from the Fed’s actions.
US Fed – Some Past Examples of Historical Movement:
- In 1994, the US Fed increased its interest rates significantly, leading to a global bond market decline and depreciation of the Indian rupee. This exacerbated India’s existing economic challenges and led to a rise in domestic interest rates.
- More recently, in 2013, the Fed’s announcement of tapering its quantitative easing program led to a sharp outflow of capital from emerging markets, including India, resulting in a significant depreciation of the rupee.
Conclusion: Analysts are cautious about the US Fed’s interest rate decision and its significant impact on the Indian economy and financial markets. The next few weeks will be difficult in determining the Fed’s policy trajectory and its impacts. Investors are advised to keep focus and closely monitor developments and be prepared for potential volatility in the market.
Some Analysts also have view: While the US Fed’s decisions have a significant impact, but they are not the sole determinant of the Indian stock market performance, also factors like both domestic and global contribute to the market’s movements.
Reference: federalreserve.gov and PTI