US Fed stimulus intact; Re may rise
Washington/New Delhi: The US Federal Reserve on Wednesday said that it would keep buying $85 billion in bonds per month and gave no explicit indication that it was close to scaling back the program, despite intense market speculation it could soon start drawing it to a close.
Describing the economy as expanding moderately, US Fed officials cited further improvement in labour market conditions, and noted inflation had been running below the Fed’s two per cent long term goal.
They also reiterated that unemployment is still too high for their comfort, reinforcing their desire to keep buying assets until the outlook for jobs improves substantially, but offered a slightly more upbeat assessment of the balance of risks to the nation’s growth.
“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall,” the Fed said after a two-day meeting.
In India and other developing markets, the Fed decision could have a positive impact on their currencies. The Indian rupee has hit an all-time low at 58.77 on Tuesday as foreign investors exited from the emerging markets in anticipation of a tapering down of US stimulus.
“The immediate cue for the rupee remains the FOMC. If the statement signals a tapering of stimulus, the rupee may breach 59,” said Navin Raghuvanshi, associate vice-president at Development Credit Bank.
The Fed’s decision to keep stimulus unchanged would help the Indian rupee and other global currencies to regain some of its lost value.
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