Market Expert Ajay Bagga explains what to expect from the US Fed meeting next week

Interest rates in the US are highest in 40 years at 8 percent while the bond yields are also hovering near 2 percent. A meeting of the US Fed is scheduled on 16 March and will we see a rate hike? Zee Business Managing Editor and Market Guru Anil Singhvi speaks with Market Expert Ajay Bagga to know what could likely be the outcome of the meeting?

Bagga said that the inflations at 7.9 percent was as per the expectations of the market and the current spike in crude oil prices has still not been accounted in this inflation rate.

He said that the initial thesis was that the US inflation will start decreasing from the month of March due to the base effect, but now due to oil it will increase a little more and can remain in upward trajectory till April and the decline may start thereafter.

The market expert sees a 25 bps increase as an outcome of the 16 March meeting. This increase has already been factored in by the Indian markets. Anything above this could become problematic.

Talking about how much the rate is going to be hiked, Bagga said that the market is expecting 7 rate hikes that mean 1.75% interest rate at the end of the year.

The core inflation is between 4.5% - 5% whereas the negative real interest rate is between 3%-3.5% which is very good for the stock market.

He said geopolitical situation and commodities prices are dominating the market because of which inflation become more durable.  

Ajay Bagga said if the Fed will not surprise the market and give a hike of 25 bases point then the market will grow fast till then it will be volatile.

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