- 24 Nov 2022
- ICICIdirect Research
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US RATE HIKES MAY BE LESSER THAN ANTICIPATED
News:
US Federal Reserve officials are in view that central bank should slow the pace of interest rate increases. Meeting minutes revealed that some of the officials were more anxious about possibility of overdoing the increases. Some officials said risk were rising that Fed’s rate increases might ultimately “exceed what was required to bring inflation back” to their 2% goal. Some warned that continuing to raise rate in 75bps “increased the risk of instability or dislocations in the financial system”. After the minutes Dollar and Yields declined. US 2 year yield move back to 4.47% and DXY near 106 levels
View:
Dollar index is likely to move lower to 104.50 levels in the coming weeks as as FOMC meeting minutes showed that most of the officials favoured slowing pace of interest rate hike. Policymakers were even worried over the risk of rapid policy tightening on economic growth and financial stability. CME fed tool watch indicates 75.8% probability of 50bps rate hike in December meeting. USDINR may face strong resistance near 82.10 levels and slip back to 81.00 levels on weak dollar, softening of crude oil prices and rise in risk appetite in the global markets
Impact:
Positive