Fed expected to tone down the pace of rate hikes in subsequent meetings
- Fed funds rate rises by 75 bps to 3.75%-4% post the Nov’22 meeting.
- Avg 30-year mortgage rates moved beyond 7% in the last week of October, recording an increase of 42 basis points since the first week. The avg rate increased 4% year-to-date.
- No fresh projections were released at this meeting and they won’t be updated until officials gather until Dec’22.
- FOMC will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities amounting approx. $1trillion a year.
- Jobless rates were lower in September than a year earlier in 354 of the 389 metropolitan areas, higher in 27, and unchanged in 8.
Market reaction
Equity
- Dow jones declined 1.5% at close yesterday.
- Sensex is trading 0.1% higher than previous close at 10:30 am today.
- Japanese Nikkei 225 is down 0.06% from its previous close yesterday.
Debt
- The U.S 10 Year G-Sec rose from 3.92% last week to 4.1% after the rate hike yesterday.
- The India 10 Year G-Sec rose from 7.39% last week to 7.45% today at 10:30 am.
- The Indian call money rates are seen not facing any major additional stress on liquidity expected from fed action. The weighted avg. rate eased from 5.93% previous day to 5.81% today.
FX Markets
- The USD index rose sharply from 110.59 last week to 112.15 yesterday, after the release, underlining the rising strength of USD against its major trading partners in an uncertain environment.
- The USDINR rose from 82.36 last week to 82.77 today at 10:30 am.
Policy rate actions across other major economies :
| Country | Policy Rate hikes in FY23 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Emerging | April | May | June | July | August | September | October | ||
| China | 3.70 | 3.70 | 3.70 | 3.70 | 3.65 | 3.65 | 3.65 | ||
| India | 4.00 | 4.40 | 4.90 | 4.90 | 5.40 | 5.90 | 5.90 | ||
| South Africa | 4.75 | 4.75 | 4.75 | 5.50 | 5.50 | 6.25 | 6.25 | ||
| Brazil | 11.75 | 12.75 | 13.25 | 13.25 | 13.75 | 13.75 | 13.75 | ||
| Developed | |||||||||
| EuroZone | 0 | 0 | 0 | 0.50 | 0.50 | 1.25 | 2.00 | ||
| U.S* | 0.50 | 1.00 | 1.75 | 2.50 | 2.50 | 3.25 | 4.00 | ||
| U.K | 0.75 | 1.00 | 1.25 | 1.25 | 1.75 | 2.25 | 2.25 | ||
*Upper range of Central bank interest rates
Likely action by RBI
RBI’s off-cycle policy meeting is scheduled for November 3rd. With CPI staying above RBI’s upper tolerance limit for the ninth consecutive month, further rate hikes are expected.
TruQuest is knowledge series launched by TruBoard Partners providing succinct updates and views on:
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Team:
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Author:
Ria Rattanpal, Research Associate
Komal Chavan, Marketing Associate
Disclaimer
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