New Delhi: Finance Minister Arun Jaitley today said with the suspense about the US Federal Reserve’s rate hike now over, markets will have to reconcile to the new financial situation. “The suspense is now over. Markets will now have to reconcile to the new situation,” he said in his first reaction to the US Fed rate hike.
Asked about the behaviour of the currency markets in the wake of the rate hike and how the government intends to tackle possible capital outflows, the Finance Minister said, “Let’s watch for a few days.” The US Federal Reserve had last night decided to raise the interest rate by 25 basis points, the first since 2006, after keeping them at near zero levels for a prolonged period.
While the move was widely expected, there were concerns that Fed hiking interest rate could result in increased outflow of foreign funds from emerging markets like India. Indian markets, however, shrugged off any negative impact and the benchmark BSE Sensitive Index (Sensex) gained over 300 points in today’s trade, which analysts attributed to markets having already factored in the Fed rate hike.
The government has claimed that Indian markets are “well fortressed” to deal with any major volatility and Fed rate hike will have minimal impact on the economy. It also does not expect any large-scale outflow of foreign funds.