What does the Fed's status quo on rates yet again mean for Dalal Street?
Even though the Fed policy outcome is on expected lines, sentiment on the D-Street improved slightly on the back of the “dot plot” of individual participants’ rate expectations suggesting 1 rate cut in 2024 and 4 more in 2025.
In its policy outcome announced on Wednesday, the US Federal Reserve has maintained status quo keeping the benchmark interest rate unchanged between 5.25 and 5.5 per cent. Further, it penciled in a single rate cut before the end of this year as against the three rate cuts anticipated in March.
"In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective," policymakers said in the statement.
Meanwhile the US CPI inflation for May came in at 3.3 per cent, which is deemed to be a positive reading that the Federal Reserve was pinning its hope on after a disappointing first quarter this year.
“The reading goes on to add more grist to Chair Jerome Powell’s belief that inflation is moving gradually towards the 2% target, even if it might be doing so on a somewhat bumpy path. A series of cooler-than-anticipated inflation readings coupled with moderating labour market conditions in the coming months will go on to bolster the Federal Reserve’s confidence that its soft landing goal is truly attainable, and within sight,” said Subho Moulik, Founder & CEO, Appreciate.
Here’s what Fed’s status quo means for D-Street
Zee Business Managing Editor Anil Singhvi held that the recent policy action of the Fed doesn’t give very good signals, nonetheless it will have limited impact on the US markets. Further he stated that amid falling inflation and weak IIP print, the RBI will consider to reduce rates.
“The US Fed keeping rates steady at their meet on June 12 was in line with expectations and hence has no effect on the Indian markets,” said Deepak Jasani, Head of Retail Research, HDFC Securities. However, the “dot plot” of individual participants’ rate expectations suggest 1 rate cut in 2024 and 4 more in 2025. This has mildly improved sentiments in the Indian markets, he added.
Sharad Chandra Shukla, Director at Mehta Equities anticipates the rate cut by the US Fed in December. Till such time Indian markets will depend on domestic factors like monsoon & budget policy direction, he noted.
Meanwhile, Aamar Deo Singh, Sr. Vice President, Research at Angel One said the US Fed's decision to hold interest rates steady and sending the message of perhaps only 1 rate cut this year, appears to be more based on the strength of the US economy and inflationary concerns. Markets had earlier factored in a minimum of 2-3 rate cuts this year but it appears that those hopes have been dashed, he added.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Senior Citizen Latest FD Rates: Know what major banks like SBI, PNB, Canara Bank, HDFC Bank, ICICI Bank are providing on fixed deposits
Gratuity Calculator: Rs 38,000 as last-drawn basic salary, 5 years and 5 months of service; what will be gratuity amount?
EPFO Pension Schemes: Early pension, retirement pension, nominee pension and 4 other pension schemes that every private sector employee should know
Top 5 Small Cap Mutual Funds with best SIP returns in 1 year: See how Rs 25,000 monthly investment has grown in each scheme
Top 7 SBI Mutual Funds With Best SIP Returns in 1 Year: Rs 25,000 monthly SIP investment in No.1 fund has jumped to Rs 3,58,404
04:20 PM IST