The United States Federal Reserve recently raised interest rates by 25 basis points to 5.5%. The Federal Reserve has recently raised its rates to the highest level seen since 2001.
How did the US market react to the same?
The Dow Jones Industrial Average declined 237.4 points, or 0.67%, to end at 35,282.72, while the S&P 500 fell 29.29 points, or 0.64%, to close at 4,537.46. The Nasdaq Composite dropped 77.18 points, or 0.55%, to 14,050.11.
What is the RBI’s stance?
The RBI has taken a wait and watch stance, monitoring inflation, mainly food and vegetable inflation. It has its own problems to tackle, Unseasonal monsoons being one.
Does the Fed’s increase in rate indicate an increase by the RBI and others?
The latest inflation rates released by the RBI are as follows: In June, the CPI inflation including Food inflation stood at 4.81%. In its June circular, it was commented that going forward, the headline inflation trajectory is likely to be shaped by food price dynamics. Wheat prices could see some corrections due to robust mandi arrivals and procurement. The next meeting of the MPC is scheduled for August 8–10, 2023. The FD rates are almost at 8.6%–9.0% now, and the home finance rates are almost hitting 11.25% above 75 lakhs.
Consumer spending is still on, and the box office numbers of both Barbie and Oppenheimer, are testament to the same. This was the question supposedly asked to Federal Reserve Chair Jerome Powell on Wednesday, who has purportedly fielded it.
In 2022, the FED raised it by approx. 225 bps, while the RBI raised it almost by 140 bps.
It’s a matter of looking at internal inflation and consumer spending, which will determine the RBI’s further stance.