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The US Fed meet was less about interest rates and more about the taper trajectory. Will the pace be doubled or will it be pushed ahead from June to April? And how high does the Fed want to push the interest rates to cull inflation?

And at 12.30am tonight, with CPI at the highest level since 1982, all these questions were answered. Adopting a more hawkish tone, the Fed is aggressively dialing back its monthly bond buying and sees three rate hikes in 2022 and three in 2023. It plans to end the taper or bond buying by March, three months ahead of its earlier schedule of June.

The Fed agreed to reduce the $120-billion-a-month in bond purchases by $15 billion a month, to $90 billion this month. This would now be accelerated, beginning next month, reducing purchases by $30 billion a month. This means that the Fed will purchase $60 billion in Treasury and mortgage securities in January, putting the program on track to end by March.

The Fed also raised its estimate for inflation next year to 2.6% from 2.2%. U.S. economic growth was also projected to slow to 4% in 2022 from an estimated 5.5% this year.

As expected, the Fed also dropped the word "transitory" to describe inflation and it left a key short-term interest rate unchanged near zero.

What does all this mean for the Indian markets? This is not something out of the blue. The way in which the inflation is moving and from the earlier Fed meet too, it was clear that the taper would be speeded up. And this is precisely what the Fed did after the 2018 crash too – the market was earlier jittery about the taper schedule but once it started, it did not matter much that the taper finished much earlier than planned. The BIG difference – at that time, inflation was too low and the interest rates were up; the worry then was about how to push up demand and bring up inflation by lowering rates.

This time around, it’s the exact opposite – inflation is sky high, demand is up with supply bottlenecks pushing up prices further and interest rates are near zero.

So, the Fed taper will have little impact on the markets but hike in interest rates will affect psychologically. There will be volatility till the first rate hike happens but it would be foolish to expect a flight of FII funds – that will not happen. Some might pull out but it will be short term. It is the rupee which will need to be watched and that means, in the coming months, IT companies and export-oriented companies will have some turbulences.

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