Factors that might influence domestic markets, investors this week
Nov 06, 2022
New Delhi [India], November 6 : When the domestic equity markets open on Monday, investors in the country would be influenced by various factors namely policy rate hikes by US Federal Reserve, the Bank of England and the report of the Reserve Bank of India that might come out next week on why it failed in maintaining the inflation mandate.
The US Federal Reserve had on November 3 raised the key policy rate by 75 basis points to over a decade high at 3.75-4 per cent in its latest monetary policy meeting. Notably, this is the fourth consecutive hike of such magnitude.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. Inflation in the US remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures. The markets on Friday were volatile during the afternoon and then settled in the green towards the closing of the markets.
After US Federal Reserve hikes key interest rates by 75 basis points, the following day, the Bank of England raised bank rate by 75 basis points -- the highest since 1992 -- to 3 per cent for combatting inflation growing in double digits and to curb the energy price crisis in the country.
The updated projections of the Monetary Policy Committee (MPC) of the Bank of England for activity and inflation described a very challenging outlook for the UK economy, as set out in the accompanying November Monetary Policy Report.
As two of the global central banks hiked its key policy rates, it is anticipated that other central banks will also follow suit in order to curb inflation in other economies of the world. If this happens, the global markets will be volatile which in turn will influence our domestic markets.
Lastly, an out-of-turn meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India was held on November 3 to discuss and draft the report to be sent to the central government for having failed in maintaining the inflation mandate.
Further details about the special meeting are not in the public domain however, when this report comes out, it might have an impact on the domestic market. Additionally, the central bank might also announce more measurements or interventions in the following weeks to come.
