New Delhi [India], Mar 16 : The Federal Reserve on Wednesday increased its benchmark interest rate a quarter point amid rising confidence that the economy is on the path of robust growth.
It for the second time in three months that the Fed has increased its interest rates, which is widely anticipated by the financial markets as it has taken the overnight funds rate to a target range of 0.75 percent to one percent and set the Fed on a likely path of regular hikes ahead.
"The market was bracing for a much more hawkish tone from the Fed. The early reaction looks to be one of relief, that the market's worst fears were averted," said Michael Arone, the chief investment strategist at State Street Global Advisors.
Some of the expected takeaways from the US Federal Reserve policy document for the Indian market include two more hikes in 2017. The statement projects two more rate hikes in 2017, which is largely on expected lines, should not hit the Indian markets hard. India is a domestic story and correction due to global factors should be bought into.
Inflation increased in recent quarters, moving close to the FOMC's two percent longer-run objective. The committee expects that inflation will stabilize around two percent over the medium term.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee said it will assess realized and expected economic conditions that go in hand with objectives of maximum employment and two percent inflation.
However, the dollar movement is also expected to strengthen after US rates, but it weakened against a basket of currencies soon after the announcement. US dollar sank to a three-week low of 100.540 against a basket of currencies. (ANI)