iifl-logo-icon 1

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

US Federal Reserve finally adopts a moderate tone

4 May 2023 , 10:36 AM

US Federal Reserve finally adopted a moderate tone yesterday, after more than 1 year of hawkishness. It increased benchmark interest rate by 25 basis points or 0.25%. This brings the Federal Funds rate in the range of 5% - 5.25%. Federal Funds Rate is the rate at which banks lend to each other, overnight, in US. It serves as the benchmark interest rate.

The more important part of the monetary policy announcement  was the Federal Reserve Chairman, Jerome Powell, saying that further interest rate hikes will be determined by the data that comes. This is a marked departure from the hawkish aggressiveness that Powell had adopted in the previous monetary policy announcements, over the past one year or more. In those meetings Powell would clearly say that more interest rate hikes are coming. This moderation in tone is being taken by many as end of the current cycle of interest rate hikes. US interest rate futures now indicate that US Federal Reserve may go for an interest rate cut in September.

This moderation in tone comes after a humbling experience for the US central bank. Its successive interest rate hikes over the past one year and more have failed to bring any significant decline in inflation rate. It was the major reason for the cause of failure of at least 3 US regional banks. The shutting down of First Republic Bank is the most recent banking failure. Interest rate hikes slowed the US economy. It delayed its recovery from the shock of Covid lockdowns.

An important point that was made in yesterday’s  announcement was the Federal Open Markets Committee (FOMC) saying that it will continue to reduce its holding of US treasury securities and other securities. This means that it will continue to reduce money supply for the time being. Central banks reduce money supply by selling the securities that they hold, in the market. They increase money supply by buying securities from the market.

This moderation in tone of US central bank is a welcome relief for India and the world. US economy is one of the engines of global economy. An economic slowdown there brings a slowdown in the global economy too. 

More interest rate hikes by the US central bank would have put further downward pressure on the value of rupee against the dollar. This would have made the Indian central bank  match the US interest rate increase with increase in interest rates in India. This would have proved disastrous for the Indian economy, that is suffering from the problem of high unemployment. India’s unemployment rate touched a 4-week high of 8.11% in April. This is completely opposite from the case in US, where unemployment rate remains low and jobs are growing robustly. 





Related Tags

  • NSE
sidebar mobile


Read More

Most Read News

Markets end the day on a flat note
24 May 2024|04:22 PM
Indian markets trade in green
24 May 2024|04:28 PM
Read More
Knowledge Centerplus

Logo IIFL Customer Care Number
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

Knowledge Centerplus

Follow us on


2024, IIFL Securities Ltd. All Rights Reserved

  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.