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US Fed kicks off hiking cycle - No Negative is also Positive

ICICIdirect Research 18 Sep 2026 DISCLAIMER

Major central bank decisions are playing out as expected, bringing a sense of relief to global markets. The U.S. Federal Reserve’s plan for rate hikes—along with the Bank of Japan wrapping up its own expected rate increase. So far, no surprises were observed as investors had already factored these moves into bond prices. While US Federal increased interest rates for the first time in last 3-years by 25 bps to 3.75%–4.00% Bank of Japan also raised rates by 25 bps to 1.25%.
Earlier, U.S. 10-year bond yield crossed 5% mark, a 10-year high level while Japan 10-year crossed 3% mark, a multi decade high. Post announcement, the marginal cool-off in the bond yields suggests that markets have adjusted to the inflation concerns due to elevated energy prices and the immediate fear of a sudden market weakness due to these events seems remote. While Central Banks acknowledging the impact of energy prices, a cool-off there can bring huge relief to the global markets. The crude prices which have been hovering above $100 levels are going to be crucial as a $10 decline in crude prices may shave ~20-30 bps in global inflation can help in renewed interest in the equity markets.  
All eyes are now turning to the Reserve Bank of India's (RBI) upcoming policy meeting from October 7th. With local inflation staying within a reasonable range, the RBI isn't under pressure to copy foreign rate hikes and can keep domestic conditions stable. As the global rate picture settles down, this upcoming RBI meeting may act as a sentiment booster.

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