{"id":34496,"date":"2022-11-04T05:54:35","date_gmt":"2022-11-04T00:24:35","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=34496"},"modified":"2025-04-20T14:22:19","modified_gmt":"2025-04-20T08:52:19","slug":"federal-reserve-hikes-rates-again-what-it-means-for-indian-markets-investors","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/federal-reserve-hikes-rates-again-what-it-means-for-indian-markets-investors\/","title":{"rendered":"Federal Reserve Hikes Rates Again: What It Means for Indian Markets, Investors"},"content":{"rendered":"<h3><strong>What\u2019s in Today\u2019s Article:<\/strong><\/h3>\n<ul>\n<li><strong>News Summary<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><strong>Why in news?<\/strong><\/h3>\n<ul>\n<li>Recently, the US Federal Reserve announced its fourth consecutive 75 basis point interest rate hike, which brought the benchmark federal funds rate to the range of 3.75% to 4%.\n<ul>\n<li>US Federal Reserve is the central banking system of the USA.<\/li>\n<\/ul>\n<\/li>\n<li>The Fed also delivered a sharp tone in favour of over-tightening in a bid to contain inflation.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>News Summary<\/strong><\/h2>\n<ul>\n<li>The US Federal Reserve has yet again raised key interest rates in its fight against red-hot inflation in the country.<\/li>\n<li>It raised the key policy rate by 75 basis points to over a decade high at 3.75-4.0 per cent in its latest monetary policy meeting.<\/li>\n<li>Notably, this is the fourth consecutive hike of such magnitude.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Reasons behind this hike<\/strong><\/h2>\n<ul>\n<li>Inflation in the US remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.<\/li>\n<li>However, the Central Bank of US only has the tools to control the demand side \u2014 which it is using to bring inflation in line with its mandate of 2%.\n<ul>\n<li>Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.<\/li>\n<\/ul>\n<\/li>\n<li>The Fed has said the battle against inflation would require borrowing costs to rise further.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Rate hike and impact on India<\/strong><\/h2>\n<ul>\n<li><strong>On RBI<\/strong>\n<ul>\n<li>Many analysts believe that the current rate hike by US Federal Reserve will nudge the RBI to do the same.<\/li>\n<li>But it is not true. RBI will not blindly follow the Fed and other central banks in raising rates.\n<ul>\n<li>The RBI considers domestic factors, especially retail inflation, while reviewing the interest rates.<\/li>\n<\/ul>\n<\/li>\n<li>However, high imported inflation has added to the retail inflation in India, and RBI has already raised the repo rate by 190 bps over the last six months.\n<ul>\n<li>With the recent hike by US Fed, there is a chance that India might import inflation and if this happens, RBI would be forced to increase the rates in India.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>On Indian Market<\/strong>\n<ul>\n<li>Fed\u2019s continuous rate hikes does not\u00a0<strong>augur well<\/strong>\u00a0(something good is predicted to happen) for emerging markets including India.<\/li>\n<li>An increase in US interest rates results in an outflow of funds to US markets, putting Indian stock markets and currencies under pressure.<\/li>\n<li>Equity markets are likely to see increased volatility in the next few months.<\/li>\n<\/ul>\n<\/li>\n<li><strong>On Indian Rupee<\/strong>\n<ul>\n<li>The outflow of funds from Indian markets will have an impact on the exchange rate of Indian rupee against the dollar.\n<ul>\n<li>The Indian rupee has been losing value against the dollar since early 2022.<\/li>\n<\/ul>\n<\/li>\n<li>A weaker rupee should help Indian exporters at some-level. Nonetheless, the chances of a recession in the rich world, including the US, have gone up and that will hurt them more.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>US Federal Reserve is the central banking system of the USA.<\/p>\n","protected":false},"author":5,"featured_media":34497,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-34496","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34496","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=34496"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34496\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/34497"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=34496"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=34496"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=34496"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}