Agency: Fed lack of interest rate action to benefit emerging markets in the short term

On 30 July, Executive Director Capital XB, Ajitabh Bharti, stated that the lack of decisive interest-rate action by the Federal Reserve suggested that there might be political considerations. In a report, he stated that, as the mid-term elections in the United States approached, the Fed was seen as placing stability above inflation control in the short term. This dynamic could benefit emerging markets such as India in the short term. The relatively weak dollar could ease the pressure on the rupees and provide some breathing space for capital flows and external balances. However, if inflation in the United States continues or accelerates again as a result of delays in policy action, the final amendment may become more drastic and destructive, leading to the transfer of volatility to global markets, including India. Kim Xian