InvestorQ : What was the highlights of the Fed meeting that concluded on 16 September?
diksha shah made post

What was the highlights of the Fed meeting that concluded on 16 September?

Aditi Sharma answered.
9 months ago

The 2-day meeting of the Federal Open Market Committee or FOMC concluded on 16 September with the Fed reiterating that it would keep interest rates near zero for as long as required to boost growth. This is accommodation at its best and markets will be happy.

The Fed agreed to continue its accommodative policy and virtually hinted that the rates may stay at the current range of 0.00%-0.25%, possibly, for the next 3 years; and perhaps even longer if warranted. This was already outlined in the Fed Long term Policy.

Under the long term policy announced by the Fed, it had already indicated that it would be willing to keep the interest rates near zero, even if the consumer inflation breached the 2% mark. It now looks like any rate hikes are ruled out till the end of 2023.

This Fed meet was especially significant because it was the last FOMC meet before the US elections later next month. In addition, the Fed also hinted that it would work towards catalyzing more fiscal stimulus to get growth back to positive territory.

From an Indian policy perspective, this gives room to the RBI to keep rates low, even if it does not cut. Also the immediate risk of any portfolio outflows due to the loss of the interest arbitrage, is not a challenge any longer for the RBI.