Sensex, the benchmark index of Bombay Stock Exchange, is down by 200 points at 35,538.55, as the market remained under pressure after the Federal Reserve hiked the interest rate on Wednesday. The Nifty, benchmark index of National Stock Exchange, also slipped by 61.70 points and is, currently, trading at 10, 791.
The Federal Reserve increased interest rates on Wednesday, by 0.25 per cent to a range of 1.75 per cent to 2 per cent. The Fed indicated that two additional increases are expected this year, as officials expressed confidence that the United States economy strengthened significantly since the financial crisis of 2008. This is the second rate increase this year.
The stance of monetary policy remained accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
Jerome Powell, Fed Chairman, said in a press conference after the end of a two-day Federal Open Market Committee meeting, “The economy is doing very well…Most people who want to find jobs are finding them. Unemployment and inflation are low … The overall outlook for growth remains favorable.”
It is expected that the economy will grow at 2.8 per cent this year compared with the previous forecast of 2.7 per cent in March. The unemployment rate is also expected to fall to 3.6 per cent compared with 3.8 per cent estimated in March.
In the statement released at the end of two-day meeting, Fed official noted that the Federal Open Market Committee which met in May indicated that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.
It further added, “Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 per cent. Indicators of longer-term inflation expectations are little changed, on balance.”