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Below View On Fed policy by Mr Anand Varadarajan, Director, Acit C Mehta Financial Services Ltd.

“The Fed has raised interest rates by 50 bps in its Dec 2022 policy meeting. This is at a slower pace than the 75 bps rate increases seen at the prior four meetings. However, the Fed has also signaled that rates will have to move higher than previously projected as inflation remains well above its target of 2.0%.

The latest policy action is pointing that slowing inflation has been encouraging and that the Fed believes further hikes, though at a slower pace, are needed to ensure that price pressures eventually drop to its 2% target.

The market expectation of terminal rate has moved slightly higher than earlier expectations for rates to peak at the high end of around 5%. It has also signaled that the rates may stay higher for longer time through 2023, disappointing market participants calling for a cut in the second half of next year”

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