Fed keeps rates at 3.75% to 4% as two dissenters seek a 25-basis-point hike
The Federal Reserve kept its benchmark rate in a 3.75% to 4% range on 28 October, but the 10-2 vote told a different story: two policymakers wanted a hike, and economists read the statement as a signal that one is coming in December.
Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favour of a 25-basis-point increase. The committee said economic activity is expanding at a strong pace, with resilient domestic spending, strong productivity growth and robust capital investment, while inflation remains elevated. It added that the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2% goal.
For Indian investors, the decision itself changes little. V K Vijayakumar, chief investment strategist at Geojit Investments, said a pause is already discounted by the market and is therefore unlikely to have any impact, pointing to value buying emerging as segments of the market become attractively valued. G Chokkalingam, founder and head of research at Equinomics Research, said crude is the bigger worry: with Brent at $115 a barrel, oil would cause India much bigger pain than rising US bond yields.
Those yields are already moving. The US 10-year climbed to 5.046% from 4.993%, a headwind for emerging markets, while Wall Street's main indices held modest gains after the announcement. Vinit Bolinjkar, head of research at Ventura, said the message matters more than the decision, describing a pause as a delay rather than a change in direction. Ravi Singh, chief research officer at Master Capital Services, said the pause may steady global sentiment but Indian gains will be limited, with foreign fund flows, crude and domestic earnings the key drivers.
Chokkalingam expects foreign portfolio investors to keep selling Indian stocks while the IPO boom absorbs money and high oil keeps the rupee weak, estimating a monthly oil import bill of $15-16 billion at current prices. Jeffrey Roach, chief economist at LPL Financial, said the committee is preparing markets for a December hike, calling the statement's new closing sentence tacit forward guidance. Chris Zaccarelli, chief investment officer at Northlight Asset Management, said that but for the proximity of the midterm elections, the Fed probably would have raised rates today.
