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Below the perspective on US Fed Reserve announcement Mr. Subho Moulik, CEO, Appreciate, a fintech platform for savings and investments

“After ten consecutive rate hikes and a pause in June, the Federal Reserve has now hiked rates again by 25 bps. As a result, the federal funds rate is now at its highest level in 22 years. But it looks like the economy is going to be okay. The US economy has been resilient despite high inflation and tightening monetary policy. The unemployment rate is near record lows in half of US states, and consumer confidence is at a two-year high. Moreover, stocks have been doing surprisingly well, with Wall Street defying the pressures of what has been the fastest hiking cycle in about 40 years.

Given these encouraging factors, economists now think a soft landing is more likely than the alternatives, which is one of the reasons the Fed doesn’t seem too worried about pushing rates up. Although inflation is gradually cooling, it still remains far above the Fed’s 2% target. The latest data indicates that the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, increased 4.6% on a year-over-year basis in May, down from 4.7% in April — the May increase was the lowest since October 2021.

The Fed’s rate hike, however, will force central banks around the world to also bump up interest rates to avoid currency depreciation risk, as the flow of capital to higher-yielding US assets might weaken their currencies.”

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