US FED interest rates at 16 years high, what will be the effect on Stock Market? | Will America sink like the banks?

 

US FED interest rates at 16 years high, what will be the effect on Stock Market?

 

The US Federal Reserve has once again increased the policy rate. Continuing its war against inflation, the Fed Reserve on Wednesday increased the policy rate by 25 basis points ie 0.25 percent. After which the fed's rate has come down to 5% to 5.25% of the target range, which is the highest since August 2007.

 

Although the market was already anticipating this increase of 0.25%, the eyes were on the fed's commentary and outlook, in which there was a big change. The policy rate in America has increased to the highest in 16 years.  But the Fed Reserve has given such indications that now it will not increase the rate further. 

The US FED said in a statement that the committee will closely monitor incoming information and assessment the impact of monetary policy. This was the 10th consecutive hike in interest rates starting from March last year. Consumer loans have become very expensive after increasing them 10 times in a row. 

Let us tell you, Fed Reserve has been increasing the policy rate continuously for the last 14 months. Due to this, the interest rate of auto loans, credit card borrowing, and business loans have doubled and there was a decline in domestic sales. With Fed's 0.25%  increase this time, the policy rate has increased to 5.1%.

After the policy meeting, Federal Reserve Chairman Jerome Powell said that the banking system remains strong and resilient. By the way, the upheaval in the financial system can slow down the pace of both spending and growth. In the statement issued after the annual meeting, one line has been removed which was mentioned in the March policy.

 

The FED said the committee estimated that some additional policy action may be appropriate to achieve the 2% global inflation target. It is being speculated that the Fed also wants to end the rate hike cycle and that is why the Fed can pass the rates in the next coming policy.

 

In America, the inflation rate had reached the highest level in 40 years, after which the Federal Reserve is continuously trying to control inflation by increasing the policy rate, but till now it has not been fully successful. Due to the increase in the interest rate and the drowning of three banks one after the other, the Fed Reserve had to increase the policy rate this time.

 

Let us tell you that the effect of this decision of the American Central Bank can be seen in the stock markets around the world today. After the Fed's decision, selling was seen in Dow Jones. The same market experts say that after the increase in interest rates by the bank, foreign investors can sell in the Indian stock market, due to which there can be a big fall in the market.

 

For the last 6 months, foreign investors are rapidly withdrawing money from the Indian stock market. His speed may be faster now. There may be a big decline in many sectors; Fed's decision will strengthen the dollar which can weaken the rupee. Also, it will be difficult to raise foreign funds. 

Increasing interest rates through the US Fed will affect the availability and cost of foreign funds for Indian companies. Global investors borrow in currencies with zero or low-interest rates to invest in assets around the world. Now it will be a little bit difficult for companies to raise funds from FDI.  According to experts, there is no possibility of inflation in India. But, there can be an impact on the stock market.

Will America sink like the banks?

 

America, which is facing the biggest crisis of recent times in the banking sector, is now in danger of becoming a pauper. The US is grappling with the threat of default after the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank. The world's most powerful and rich country the USA is standing on the threshold of poverty.

 

You might be shocked to know, but let us tell you that this is not a joke but a reality. The condition of America, which is proud of its powerful army, dollar, and prosperity all over the world, is so bad these days that there is a danger of defaulting in the next month. Finance Minister Janet Yellen warned on Monday that America will not have enough money to meet its financial obligations by June.

 

He said that this would create the danger of debt, which could lead to disaster. Other US policymakers are debating whether to increase debt selling. However, the borrowing feeling ie the scope of taking the maximum loan was increased last week itself. It was done in the United States House of Representatives and many restrictions were imposed in it.

 

Republicans feel that the government of Democratic President Joe Biden is spending more money than the limit. Republicans want to pass the growing act from the limit in the lower house. On the contrary, Joe Biden has denied any cut in the budget. And in the midst of all this, US President has called four top leaders of the US Congress into the White House next week.

 

Treasury Secretary Janet Yellen has given a clear warning that if Congress does not take action in this matter, it will be difficult for America to meet its payment obligations. Talk, if America goes on the path of defense, then it can create havoc not only in America but in the entire global economy. 

Joe Biden has spoken on the phone with House Speaker Kevin McCarthy to deal with this problem. McCarthy is currently in Jerusalem. Biden has invited him to the White House on 9 May. Not only this, Biden is also consulting with other leaders and is trying to deal with this difficulty. 

The American banking sector is already passing through a difficult phase and there have been three bank failures in the last one and a half months. JP Morgan Chase has taken over the first Republican on Monday. This bank had sunk and was taken over by the regulators. Earlier, SVB and Signature Bank have also sunk. 

America has never defaulted in its entire history. In such a situation, default can push America into the big market. This can cause a crisis on thousands of millions of jobs and this crisis can take the whole world in its grip. This is the reason why Janet Yellen's warning is also scaring the whole world at this time.