The US central bank Federal Reserve has raised the interest rate. It has increased the interest rate by 0.25%. This is the first increase in interest rates in the US since 2018. One-fourth percent increase in interest rate was already being expected. The Federal Reserve has also told many important things. It has said that by the end of this year, the interest rate in the US will be in the range of 1.75 to 2 percent. He has also said that the rate of inflation in America will come down only by next year.
The Federal Reserve’s move had an impact on stock markets around the world on Thursday. In India too, the stock market opened with great momentum. At 11:30, the BSE Sensex was showing a gain of about 1000 points. The question is, what will be the effect of increasing the interest rate in America, will it increase the pressure on RBI to increase the interest rate in India. Let us try to know the answer to these questions.
What will be the effect of raising the Federal Reserve’s interest rate?
The US markets closed sharply on the news of interest rate increase in America. Stock markets around the world including India have seen a boom. Experts say that the uptrend in the stock market may continue. The reason for this is that the state of uncertainty seems to be coming to an end. Interest rates have increased in America. The results of the assembly elections in five states of India have been declared. BJP is going to form government in four states. On the other hand, efforts are being made to end the war between Ukraine and Russia. Crude has come down to $100 per barrel. Last week it had reached $139 a barrel. Due to all these factors, the sentiment of the stock market may remain positive.
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Will the increase in interest in the US affect RBI’s policy as well?
Yes, the effect of increasing interest rate in America is expected to affect the policy of RBI. The reason for this is that the Federal Reserve has raised the interest rate to control inflation. Inflation in the US has reached 7.9 percent, the highest in 40 years. Inflation has also increased in India. Especially due to the Russia-Ukraine crisis, commodity prices, including crude, have jumped. This will affect the inflation rate. In such a situation, a change in the attitude of the Reserve Bank can be seen.
Can RBI’s monetary policy also change?
RBI’s Monetary Policy Committee (MPC) meeting will be held from 6th to 8th of next month. This will be the first meeting of the RBI’s MPC in the new financial year. RBI has so far maintained its stance accommodative. The reason for this is that so far retail inflation has remained within the limits set by the RBI.
Experts say that the RBI will have to change its estimates on inflation. This is because there are signs of inflation rising. Second, RBE can also change its accommodation stance.
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