Explained! Anil Singhvi reveals how US Fed's decision will boost equities

The US Federal Reserve kept its benchmark interest rate unchanged at record-low level of near zero amid mounting fallout from the COVID-19-induced recession. It also projected interest rates to remain at the current level through at least 2022. Zee Business Managing Editor Anil Singhvi has interpreted the move for investors in India and said that the decision will boost the equity markets by changing the flow of cash. 

“There are some positives and negatives of this decision. Fed has announced that interest rates will stay at around 0 per cent. The positive part is that interest rates will not be hiked in the coming days and you will continue to get money at cheap rates. These are the positives. The negatives are that the interest rate will not go into negative territory. Also, this hints that Fed believes that recovery will take about two years,” Singhvi explained.

He said that this has reflected in the markets as well. Investors have a long term outlook when Fed meets. The market behaves accordingly.

WATCH | Anil Singhvi's take 

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Singhvi said that if rates remain at 0 per cent for next two years, it can re-direct investors towards equity markets. He said that there is a risk but you can already see positive trends in markets. The US markets are strong and more money is flowing into equities. 

“For me, the outcome of Fed meeting was neutral. In fact, I believe it was slightly on the positive side than negative,” Singhvi said. 

Earlier in the day, the the Federal Open Market Committee, the Fed`s policy-making body had said: "The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

In light of these developments, the committee decided to maintain the target range for the federal funds rate at 0 to 0.25 per cent. 

"The virus and the forceful measures taken to control its spread have induced a sharp decline in economic activity and a surge in job losses," Federal Reserve Chairman Jerome Powell said in a virtual press conference on Wednesday.