FED STATEMENT - ADOPTS A 'DOVISH' STANCE
By Ruma Dubey
What kind of a hold does the US Federal Reserve have on the Indian and global markets? An expected statement held the market in tandem – neither here nor there. But the good part was the at least there was no rout on the Indian markets post the Chinese markets falling and Indian Rupee hitting new lows, once again.
The statement issued by the Federal Reserve tonight was really a non-event. Just six weeks ago, it had hiked rates and no one in their sane minds had expected any hike tonight. But what everyone was looking for was “an indication” of when it could happen next. The tone of the statement, dovish or hawkish is what all eyes were peeled for and ears tuned to across world.
As expected, there was no change in interest rates but the Fed changed its “tone” – from Hawkish it is now more Dovish. This in turn means that the Fed is in no hurry to hike rates this year – so for all those who debated about 4 or 5 rate hikes this year, this statement should be a revelation.
The Fed said, “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
It also said that it is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”
The Fed remained firm about its 2% inflation target but at the same time conceded that inflation is expected to remain low in the near term due to further declines in energy prices.
Tonight was just a statement, there was neither an ensuing Press Conference nor economic forecasts to ruminate on; March 16th is when there will be both and that would be an event.
What today’s ‘wait-and-watch’ indicated that world over, like in India, there are no domestic triggers forthcoming and thus each is looking outward for some sense of direction.
Now today we are back to square one – its once again Q3 results, China, rupee. Results to watch would be Bharti Airtel, Dabur, Emami, Glenmark, HCC, ICICI Bank, Maruti, Symphony, Titan amongst many more. And yes, after this, all eyes will be on 2nd Feb – RBI Credit Policy.