Fed rate up, India may see ripple effect

The committee decided to raise the target range for the Federal funds rate from 1.5 per cent to 1.75 per cent.

The US Federal Reserve on Wednesday raised the benchmark lending rate by 25 basis points (bps), citing better employment scenario, improvement in economic activity and moderate inflation. The committee decided to raise the target range for the Federal funds rate from 1.5 per cent to 1.75 per cent.

Fed officials, meeting for the first time under new chairman Jerome Powell, also forecast further rate hikes going forward thanks to robust economic outlook. The Fed is expected to effect three more rate hikes this year.

“Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low,” it said in a post-meeting statement.

Wednesday’s rate hike came as no surprise as the new chairman recently indicated the Fed would go ahead with interest rate hikes despite the market turmoil.

The ripple effect of the Fed rate hike may be felt in India, too. The hike is considered negative in general for the US stock market; if there’s another round of sell-offs, it could spread to the Indian markets as well. Also, the rupee might weaken, hitting India’s forex reserves and imports.

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com