Indications that the Federal Reserve will maintain interest rates will affect the Indian stock market

Fed Reserve Rate Announcements: US Federal Reserve officials may keep interest rates unchanged for the sixth consecutive time. Furthermore, with inflation higher than expected, there are clear signs that there are no plans to raise interest rates in the near future. The Federal Open Market Committee will keep the target range for the benchmark rate at 5.25 percent to 5.5 percent. Which will be recorded at the top of two decades after July. An announcement will be made regarding the status of the balance-sheet reduction program. President Jerome Powell will hold a press conference on interest rates in Washington on Wednesday.

Fed will keep rates on hold until inflation comes under control

According to the US Federal Reserve, there will be no reduction in borrowing costs until inflation stops at 2%. The current rate is suitable for the strong economy of the country. Earlier this year, Fed had announced rate cut. But due to the geopolitical crisis, Powell indicated that he has decided not to make any cuts this year.

Investors’ wait and see policy on Fed decision

“While it is appropriate to wait for the Fed’s decision, more time is needed to make the right decision on policy,” said Michael Gapen, head of US economics at Bank of America Corp. According to him, no decision will be taken until inflation is completely controlled.

What is the impact on Indian stock market?

If interest rates are maintained by the Federal Reserve then foreign investors can withdraw funds from the Indian equity market. However, if there is no increase in interest rates, the volume of selling by FPIs may remain limited. The dollar index will strengthen, which will reduce demand for the precious metal. As a result, the price of gold and silver may also decrease at the local level. US Treasury yields will also increase. Therefore, foreign investors would prefer to invest in the American market instead of investing in India for 10 to 12 percent returns.