US Federal Meeting Outcome

The US Federal Reserve is expecting to keep hold on the current interest rates, maintaining the 5.25-5.50 percent range, as per the latest update from the ongoing two-day monetary policy meeting. In addition, to displaying interest rates, it will also release a Summary of Economic Projections. The rate cut probability is expected to a steady ratio until the second half quarter of 2024. As per Richard Harris, Chief Executive of Port Shelter Investment Management, the market is generally looking at 25 basis points [bps] rate cuts next year. That is 1.25 percent concluding at 4 percent by the end of next year.

Ahead of the central bank rate decision, it has been estimated that US Inflation ticked down again in November, with cheaper gas helping further lighten the weight of consumer price increases in the United States. At the same time, the latest data on consumer inflation showed that prices in some areas like services such as restaurants, used cars, and auto insurance continued to rise uncomfortably fast.

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Gold prices eased to their lowest levels in more than three weeks as the dollar edged higher ahead of the US Federal Reserve's interest rate decision and policy outlook later in the day. Oil prices extended losses, after falling by more than 3 percent to six-month lows on oversupply and demand concerns.

Looking ahead, the Federal Reserve will continue to closely monitor key economic indicators, particularly inflation, and adjust its policy accordingly. The FOMC's rate-setting panel carefully analyzed various factors influencing the economy, such as inflation and GDP growth. According to fresh data published, the unemployment rate has remained close to historic lows. The data suggest the Fed is on track for a so-called soft landing, a rare feat in monetary policy when high-interest rates bring down inflation without plunging the country into a damaging recession.

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IMPACT ON THE INDIAN ECONOMY:

The Federal Reserve controls the three tools of monetary policy: open market operations, the discount rate, and reserve requirements. It sets US monetary policy to promote maximum employment and stable prices in the US economy.

Higher US interest rates could lead to foreign investors pulling money out of India, weakening the rupee and making imports more expensive. Short-term foreign investors may be more likely to sell their Indian stocks due to the market's volatility and the falling rupee.

The US dollar index if risen could lead to a weakened rupee against the dollar. Frankly, the US Stock market is one of the most important markets in the world and its performance has an impact on other stock markets including Indian stock market.

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