US FOMC meet outcome Live: Federal Reserve likely to hold interest rates

The favourable decline in US inflation, driven by lower energy prices, and speculation about a potential pause in the Fed rate hike campaign, brought comfort to global equities. However, the persistence of higher core inflation levels may compel the Fed to maintain its hawkish tone during today’s policy announcement with indication of a prolonged pause, says Vinod Nair, Head of Research, Geojit Financial Services.

Domestic equity benchmarks the Sensex and the Nifty50 ended in the green on Wednesday, extending their winning run into the third consecutive session ahead of the US Federal Reserve’s interest rate decision.

The Sensex gained 85.35 points, or 0.14%, to close at 63,228.51, and the Nifty ended 39.75 points, or 0.21%, higher at 18,755.90.

BSE Midcap index hit a fresh all-time high of 28,105.88 in intraday trade before closing 0.20% higher at 28,046.55. The BSE Smallcap index also hit its fresh all-time high of 32,048.81 before closing 0.42% higher at 32,011.90. Read here

The Federal Reserve began its two-day policy meeting on June 13 to set its benchmark lending rate amid cooling inflation in the world’s largest economy. The Federal Open Market Committee’s (FOMC) interest rate decision will be announced on June 14 at 2:00 p.m. ET or 11.30 IST. The meeting will be chaired by Jerome Powell. Read here

The US Fed is the world’s most powerful central bank and its decision on federal funds rate have a significant impact on emerging markets like India. While the market has broadly discounted a pause in rate hikes this time, an in-line Fed outcome will have little impact on the market. However, if the Fed surprises the market and decides to lift rates, the market may see a sharp selloff. On the other hand, if the Fed takes a pause and signals that it is preparing for rate cuts in the subsequent policy meetings, the market may see strong gains. Read more

Gold prices edged higher on expectations of a interest rate pause at the Federal Reserve’s policy meeting concluding later in the day, while a softer dollar also boosted bullion, Reuters reported.

Spot gold rose 0.4% to $1,950.09, while US gold futures rose 0.2% to $1,962.90.

The two-day US FOMC meeting concludes today, with the status quo policy stance looking a script written on stone. The calls for a rate pause have got louder following a sharp slowdown in consumer price inflation released yesterday. We believe that the US Fed would breathe a sigh of relief as the core point of discussion i.e. inflation is moving to a lower trajectory and provides the central bank a leeway to adopt a “wait and watch” approach to its hawkish monetary policy. 

We would be closely monitoring the post-meeting commentary from the Fed Chair, Jerome Powell, for signs of a pivot to rate hikes. Additionally, the central bank’s reading of the financial stability and a probable slowdown in economic growth would be eyed for gauging the use of further ammunition by the Fed at its next policy meeting in July.

The US consumer prices rose by 4.0% YoY in May. The annual increase in the US consumer price index (CPI) was the smallest in more than two years. The CPI rose 0.1 percent in May, decelerating from 0.4 percent in April, the Labor Department said.

Excluding the volatile food and energy components, consumer inflation was up 5.3 percent over the last 12 months.

The dollar hovered around multi-week lows against the euro and sterling on Wednesday, after unexpectedly soft US inflation data cemented the view that the Federal Reserve will not raise interest rates later in the day, Reuters reported.

The dollar index – which measures the performance of the US currency against six others – was flat at 103.20, after touching its lowest since May 22 overnight at 103.04.

The US Federal Reserve has raised interest rates 10 times since March 2022 as it grapples with inflation which still remains well above its long-term target of 2%.

The Federal Open Market Committee’s (FOMC) interest rate decision will be announced on June 14 at 2:00 p.m. ET or 11.30 IST.