there is lots of noise regarding the taper situation going on ( that fed will hike interest rate and that will hurt the emerging economy specially india like 2013). My question why would fed doing it? just to curb down the inflations? where many world’s economy is trying to come out of the covid situation and trying to bring back economy on track, isn’t hiking interest rate will hurt their economy too? where new delta variant is also picking up in USA ( though vaccines roll out is going good enough). where as our RBI governor still keeping interest rate low and said this inflation is transitionary and we will keep the repo rates unchanged that shows the are trying to boost the economy no matter what. what would be likely impact of this situation on our markets?
Can sanjay sir through some light on it?
Taper tantrum is a media hype these days…
a) Fed will do it in a very calibrated manner if they find strong signs of economic recovery evidenced by falling unemployment rate and rising inflation.
b) Every economy is in a different stage in its business cycle and hence policy responses are not necessarily in lock step
c) When something happens for the first time, it comes as a surprise and jolts markets.When it happens second time, effect on markets is subdued and transitory.