THE MUCH AWAITED US FED STATEMENT - A COMPLETE DAMP SQUIB

By Ruma Dubey

Today’s decision by the US Federal Reserve was as expected – a complete non-event. It was simply not to be. We all knew that yet the world markets, India included just decided to wait and watch…in case there is a surprise? Well, there was none!

The US Federal Reserve tonight left the policy rates unchanged and also sent out strong signals – it is in no hurry to hike rates in the weeks ahead … now its maybe June.

A quick run through the statement issued:

• The Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

• In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.

• 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.

• Inflation has continued to run below the Fed’s 2 percent target, and market-based measures of inflation compensation remain low.

Well a run through the statement, one could not help but feel that the very same words and text have been read so often in the past…sometimes it makes one wonder whether it the statement is just a ‘copy-paste’ of previous statements.

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 Q4 results, China, rupee. Results to watch would be ICICI Bank, SBI, PNB, HDFC, Century Textiles, TVS Motor, Symphony, Titan amongst many more. And yes, we can only keep on hoping that the GST will get through in this session.