InvestorQ : Do you see the recent changes announced by Fed impacting the Indian economy and why?
Chandralekha Desai made post

Do you see the recent changes announced by Fed impacting the Indian economy and why?

Answer
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NISHA Nayak answered.
4 weeks ago


There are 5 important takeaways for India from the new Fed approach to rates.

· The MPF gives RBI confidence to cut rates in the coming MPC meets in October or at least in the next one in December this year.

· The move means that bond yields in the US will stay below the 1% mark. Hence, probability of risk-off out of India to developed markets reduces drastically.

· It also means there will be ample liquidity in the system. Liquidity infusion by the Fed and other central banks will persist, which is good news for Indian markets.

· RBI is now needs to start thinking on similar lines like the Fed has articulated its MPF. RBI must make a longer term monetary plan and shift the focus to growth.

· Lastly, RBI must acknowledge that now dovishness may have limited impact for India. The other way would be to sync more with fiscal policy to be effective.