Indian markets are well placed to absorb the 0.25% interest rate increase by the US Fed on Wednesday night, the finance ministry said yesterday. "Indian markets (are) well placed to absorb the US Fed rate hike. Gradual approach in future increases augurs well for emerging markets," Economic Affairs Secretary Shaktikanta Das tweeted.
As popularly expected, the Federal Reserve raised its benchmark interest rate for the second time in three months and forecast two additional hikes this year.
"In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range for the federal funds rate... Near-term risks to the economic outlook appear roughly balanced," the Federal Open Market Committee (FOMC) said in its statement.
Prithviraj Kothari, MD RSBL said, “Looking at the current momentum and economic indicators in the US, the next hike could come in the month of June and while other one should come in December. Precious metals have been the directly casualty as the probability of Rate hike increased over the past few days.”
“Gold and other precious metals could loose a bit of steam in investor’s portfolio but the safe haven appeal would continue with the global uncertainties on radar,” Kothari added.
RBI’s policy unlikely to be impacted by Fed rate hike
The US Fed rate hike is no surprise and may not impact RBI's policy next month as it had already factored in the global development and will be guided by local factors, said experts. The US Fed hike is as per the expected lines, which raised its benchmark interest rate for the second time in three months and there is forecast of two additional hikes this year, experts said.
"RBI will not cut interest rate... Rate cut cycle is over as far as RBI is concerned," Crisil Chief Economist D K Joshi said. RBI is expected to stay put on the repo rate in its upcoming monetary policy next month because of rise in inflation -- both wholesale and retail. The monetary policy review is due on April 5-6.