The US Federal Reserve last night hiked the benchmark interest rate by 75 basis points in an effort to bolster the fight against inflation. Zee Business Managing Editor Anil Singhvi in a special edition of Editor’s Take today morning decoded the impact of the policy decision on the Indian markets.
Anil Singhvi said that he believes both the US markets and Indian markets have surged on the back of positive commentary of US Fed Chair Jeremy Powell. Besides, the Fed maintaining a Dovish stance has also acted in the favour of the markets.
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He stated that the market had adjusted itself for around a 100 bps (1%) rate hike by the US Fed with an aggressive commentary by Powell. However, the positive commentary with a 75 bps hike acted well and the market reacted positively.
He mentioned that Powell “couldn’t have said or done better than this” with respect to the policy decision.
The US markets last night rallied only after Powell’s commentary, wherein he said that the Fed will study the inflation data and only then will decide to take aggressive rate hikes in future policies.
The second big statement Powell made was on the US recession, wherein the Fed Chair said that he doesn’t see the US going into recession and cleared the air over concerns regarding the recession, giving much-needed impetus to US markets on Wednesday, Singhvi said.
Practically, there is no recession in the US if we see macros and jobs data as well as corporate results, Singhvi said. The US economy hasn’t shown even a single sign of recession, he added.
Technically, if GDP growth is negative for the consecutive two quarters, then the country is said to be in recession, Singhvi mentioned, and with time things change and so is the definition, he added.
The US Fed Chair has made statements that gave comfort at a larger scale, however, there may be chances that again in September Fed may take a 75 bps hike again the managing editor believes.
Most importantly, Powell’s confidence in controlling inflation, giving priority to growth, and not much required to be aggressive are the key takeaways of his commentary, Singhvi said.
This confidence is mainly seen in the softening of commodity prices lately, which may aid the global as well as US inflation to cool off, and its possible, Singhvi affirmed.
Before concluding, Singhvi summed up by saying actions of the US Fed were in line with expectations, while words that is a commentary of Powell were higher than expected.