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Spillover Effects of the US Federal Reserve Rate Hike
Emerging markets, including India, must brace for depreciating pressure on their currencies and volatility in markets.
Radhika Pandey and Pramod Sinha write:
The United States (US) Federal Reserve announced the third consecutive 75 basis points rate hike on 21 September. The rate hike was on expected lines after the hawkish commentary by the US Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium. Powell reiterated that the Fed would take “forceful” and “rapid” steps to moderate demand, and warned of impending “pain” for households and businesses alike. The US rate hike marks a cumulative 300 basis points rate hike since the pandemic lows. Other countries’ central banks, such as the United Kingdom and South Africa, have hiked rates by 150 basis points, while the European Central Bank has hiked rates by 125 basis points in an attempt to tackle the red-hot inflation.
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