A look at how Federal Reserve's decision is going to affect Dalal Street
Two years ago, markets turned nervous whenever the then US Federal Reserve chairman Ben Bernanke spoke of "tapering" — a threat that easy money would dry out. Indeed, markets had corrected to a point where stocks rose after the actual tapering. Will it be the same if Fed, now led by Bernanke’s successor Janet Yellen, finally decides to hike rates today? Opinions are divided. More than a hike, a lot would depend on the Fed commentary. Markets may stabilise after a brief fall if the language doesn’t suggest a string of future hikes; but the reaction would be stronger if the tone is hawkish — a possibility that most have ruled out. But if Fed keeps rates unchanged, there could be a very brief rally before traders and economists restart the guessing game. On Wednesday, Bloomberg calculation showed that there’s only 30 per cent probability of a rate hike.
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