U.S. Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee (FOMC), at the U.S. Federal Reserve in Washington, D.C.
| Photo Credit: Reuters

U.S. President Donald Trump said Friday (January 30, 2026) that he will nominate former Federal Reserve official Kevin Warsh to be the next chair of the Fed, a pick likely to result in sharp changes to the powerful agency that could bring it closer to the White House and reduce its longtime independence from day-to-day politics.

Mr. Warsh would replace current chair Jerome Powell when his term expires in May. Mr. Trump chose Mr. Powell to lead the Fed in 2017 but this year has relentlessly assailed him for not cutting interest rates quickly enough.

The appointment, which requires Senate confirmation, amounts to a return trip for Mr. Warsh (55) who was a member of the Fed’s board from 2006 to 2011. He was the youngest governor in history when he was appointed at age 35. He is currently a fellow at the right-leaning Hoover Institution and a lecturer at the Stanford Graduate School of Business.

In some ways, Mr. Warsh is an unlikely choice for the Republican President because he has long been a hawk in Fed parlance, or someone who typically supports higher interest rates to control inflation. Mr. Trump has said the Fed’s key rate should be as low as 1%, far below its current level of about 3.6%, a stance few economists endorse.

During his time as governor, Mr. Warsh objected to some of the low-interest rate policies that the Fed pursued during and after the 2008-09 Great Recession. He also often expressed concern at that time that inflation would soon accelerate, even though it remained at rock-bottom levels for many years after that recession ended.

But more recently, however, in speeches and opinion columns, Mr. Warsh has said he supports lower rates.

Controlling the Fed

Mr. Warsh’s appointment would be a major step toward Mr. Trump asserting more control over the Fed, one of the few remaining independent federal agencies. While all presidents influence Fed policy through appointments, Mr. Trump’s rhetorical attacks on the central bank have raised concerns about its status as an independent institution.

The announcement comes after an extended and unusually public search that underscored the importance of the decision to Trump and the potential impact it could have on the economy. The chair of the Federal Reserve is one of the most powerful economic officials in the world, tasked with combating inflation in the United States while also supporting maximum employment. The Fed is also the nation’s top banking regulator.

The Fed’s rate decisions, over time, influence borrowing costs throughout the economy, including for mortgages, car loans and credit cards.

For now, Mr. Warsh would fill a seat on the Fed’s governing board that was temporarily occupied by Stephen Miran, a White House adviser who Trump appointed in September. Once on the board, Trump could then elevate Mr. Warsh to the chair position when Mr. Powell’s term ends in May.

Trump’s economic policies

Since Trump’s reelection, Warsh has expressed support for the President’s economic policies, despite a history as a more conventional, pro-free trade Republican.

In a January 2025 column in The Wall Street Journal, Mr. Warsh wrote that “the Trump administration’s strong deregulatory policies, if implemented, would be disinflationary. Cutbacks in government spending — inspired by the Department of Government Efficiency — would also materially reduce inflationary pressures.” Lower inflation would allow the Fed to deliver the rate cuts the President wants.

Since his first term, Mr. Trump has broken with several decades of precedent under which Presidents have avoided publicly calling for rate cuts, out of respect for the Fed’s status as an independent agency.

Mr. Trump has also sought to exert more control over the Fed. In August he tried to fire Lisa Cook, one of seven Governors on the Fed’s board, in an effort to secure a majority of the board. He has appointed three other members, including two in his first term.

Ms. Cook, however, sued to keep her job, and the Supreme Court, in a hearing last week, appeared inclined to let her keep her job while her suit is resolved.

Economic research has found that independent central banks have better track records of controlling inflation. Elected officials, like Mr. Trump, often demand lower interest rates to juice growth and hiring, which can fuel higher prices.

Mr. Trump had said he would appoint a Fed chair who will cut interest rates, which he says will reduce the borrowing costs of the federal government’s huge $38 trillion debt pile. Mr. Trump also wants lower rates to boost moribund home sales, which have been held back partly by higher mortgage costs. Yet the Fed doesn’t directly set longer-term interest rates for things like home and car purchases.

Potential challenges and pushback

If confirmed by the Senate, Mr. Warsh would face challenges in pushing interest rates much lower. The chair is just one member of the Fed’s 19-person rate-setting committee, with 12 of those officials voting on each rate decision. The committee is already split between those worried about persistent inflation, who’d like to keep rates unchanged, and those who think that recent upticks in unemployment point to a stumbling economy that needs lower interest rates to bolster hiring.

Financial markets could also push back. If the Fed cuts its short-term rate too aggressively and is seen as doing so for political reasons, then Wall Street investors could sell Treasury bonds out of fear that inflation would rise. Such sales would push up longer-term interest rates, including mortgage rates, and backfire on Mr. Warsh.

Mr. Trump considered appointing Mr. Warsh as Fed chair during his first term, though ultimately he went with Mr. Powell. Mr. Warsh’s father-in-law is Ronald Lauder, heir to the Estee Lauder cosmetics fortune and a longtime donor and confidant of Trump’s.

Who is Warsh?

Prior to serving on the Fed’s board in 2006, Mr. Warsh was an economic aide in George W. Bush’s Republican administration and was an investment banker at Morgan Stanley.

Mr. Warsh worked closely with then-Chair Ben Bernanke in 2008-09 during the central bank’s efforts to combat the financial crisis and the Great Recession. Mr. Bernanke later wrote in his memoirs that Mr. Warsh was “one of my closest advisers and confidants” and added that his “political and markets savvy and many contacts on Wall Street would prove invaluable.” Mr. Warsh, however, raised concerns in 2008, as the economy tumbled into a deep recession, that further interest rate cuts by the Fed could spur inflation. Yet even after the Fed cut its rate to nearly zero, inflation stayed low.

And he objected in meetings in 2011 to the Fed’s decision to purchase $600 billion of Treasury bonds, an effort to lower long-term interest rates, though he ultimately voted in favor of the decision at Mr. Bernanke’s behest.

In recent months, Mr. Warsh has become much more critical of the Fed, calling for “regime change” and assailing Mr. Powell for engaging on issues like climate change and diversity, equity and inclusion, which Mr. Warsh said are outside the Fed’s mandate.

His more critical approach suggests that if he does ascend to the position of chair, it would amount to a sharp transition at the Fed.

In a July interview on CNBC, Mr. Warsh said Fed policy “has been broken for quite a long time.” “The central bank that sits there today is radically different than the central bank I joined in 2006,” he added. By allowing inflation to surge in 2021-22, the Fed “brought about the greatest mistake in macroeconomic policy in 45 years, that divided the country.”

The week ahead promises intense action on D-Street packed with domestic events, primary market buzz, corporate action, and some major global cues, which will keep investors busy as Indian equities navigate the first few weeks of 2026 with caution amid new geopolitical tensions. The ongoing December quarter results and listings will drive stock-specific action, while the US Federal Reserve policy verdict and the Economic Survey 2026 will be analysed for sector-specific trades.

The progress on India-US trade deal negotiations and Trump tariff rates are likely to influence movement in the domestic market this week. The India Energy Week 2026, to be conducted between Jan. 27-30, will reshape the global energy dialogue, according to India Inc experts. Trading activity of foreign investors would also influence the overall market trend.

ALSO READ: Stock Market Crash: Nifty Falls Near 25,000, Sensex Down Over 800 Points – Key Drivers Behind Decline

”Market direction in the coming week is likely to be driven by global macroeconomic signals and domestic fiscal expectations. Investors will closely track guidance from the Fed on the trajectory of interest rate cuts, while positioning may be influenced by anticipation surrounding the Union Budget, particularly any measures aimed at easing external trade pressures and supporting capital flows,” said Vinod Nair, Head of Research, Geojit Investments Limited.

”With the Q3 earnings season still underway, stock-specific movements are expected to remain prominent. Overall sentiment is likely to stay cautious, shaped by global developments, currency trends, and earnings outcomes, with selective opportunities emerging in segments supported by resilient domestic demand,” added Nair. Investors will also track rupee’s movement against the dollar.
 

Nifty bears drag index near 25,000 levels, Sensex ends 700 points down; RIL, Eternal top drags

For more stock market updates, visit: https://t.co/0baANpJ6jN pic.twitter.com/PedfyQYdxN

— NDTV Profit (@NDTVProfitIndia) January 23, 2026

Markets on Home Turf

Domestic equity benchmarks Sensex and Nifty witnessed widespread selloff and settled 1% lower on Friday, weighed down by widespread sell-off and the rupee hitting a record low against the US dollar. Besides, investors rushing to safe-haven assets and unabated foreign capital outflows in the absence of domestic triggers dampened investor confidence, traders said.

On a weekly basis, the BSE Sensex tumbled by 2,032.65 points, or 2.43%. The broader NSE Nifty also slumped by 645.7 points, or 2.51%. The rupee hit an all-time low of 92 on Friday and recovered marginally to provisionally settle at 91.88 against the dollar. Gold and silver prices rallied in global markets over Fed rate cut expectations.

ALSO READ: Davos 2026: AI Boom, Tariff Noise, To Donald Trump’s Gaza Peace Board – 10 Key Highlights From WEF

Q3 Results This Week

D-Street will respond to the blue-chip firms that declared their Q3 results in the weekend, such as Kotak Mahindra Bank, UltraTech Cement, and others. Starting from Jan. 26, a slew of companies will declare December quarter results during the week including Axis Bank, Asian Paints, Metro Brands, Maruti Suzuki India, Raymond, among several others.

US Federal Reserve

Jerome Powell-led US Federal Reserve will announce its upcoming monetary policy decision on Jan. 28, 2025, amid Wall Street’s expectations of a pause on the federal funds range. Notably, US President Donald Trump will likely announce the name of the next Fed Chairman this week, who will succeed Powell in May 2026, after the end of his term.

Economic Survey, Budget 2026, Auto Sales

The Economic Survey 2026-27 is scheduled to be tabled in Parliament on January 29, 2026, at 11 AM during the Budget Session. Finance Minister Nirmala Sitharaman will unveil Union Budget 2026 on Sunday, Feb. 1, 2026. Due to the presentation of the budget, the Indian stock market will remain open for regular trading on Feb. 1.

Also, leading automakers will also delcare their monthly sales numbers on Feb. 1, which will trigger stock-specific action.

ALSO READ: Davos 2026: Geopolitics Or AI? RPG’s Anant Goenka Outlines India Inc’s Theme For 2026

Corporate Action & Primary Market

Several stocks such as Wipro, Persistent Systems, SRF, Jindal Stainless, Coforge, Mastek, among others will trade ex-dividend this week. The primary market also promises heated action as five new public issues will open for subscription in the mainboard segment, while three companies will get listed on BSE, NSE, after the conclusion of their IPO windows.

The Federal Reserve cut its key interest rate by a quarter point Wednesday (September 17, 2025) and projected it would do so twice more this year as concern grows at the central bank about the health of the nation’s labour market.

The move is the Fed’s first cut since December and lowered its short-term rate to about 4.1%, down from 4.3%. Federal officials, led by Chair Jerome Powell, had kept their rate unchanged this year as they evaluated the impact of tariffs, tighter immigration enforcement, and other Trump administration policies on inflation and the economy.

Yet the central bank’s focus has shifted quickly from inflation, which remains modestly above its 2% target, to jobs, as hiring has ground nearly to a halt in recent months and the unemployment rate has ticked higher.

Lower interest rates could reduce borrowing costs for mortgages, car loans, and business loans and boost growth and hiring.

“In this less dynamic and somewhat softer labour market, the downside risks to employment appear to have risen,” Mr. Powell said at a press conference following the Federal’s two-day meeting.

Federal officials also signalled that they expect to reduce their key rate twice more this year, but just once in 2026, which may disappoint Wall Street. Before the meeting, investors had projected five cuts for the rest of this year and next.

Just one Federal policymaker dissented from the decision: Stephen Miran, who President Donald Trump appointed and was confirmed by the Senate in a rushed vote late Monday (September 15, 2025) just hours before the meeting began. Miran preferred a larger half-point cut, but Mr. Powell told reporters there wasn’t “very much support” for the bigger-size cut among Federal officials.

Many economists had forecast there would be additional dissents, and the meeting’s outcome suggests that Mr. Powell was able to patch together a show of unity from a committee that includes Miran and two other Trump appointees from his first term, as well as a Federal Governor, Lisa Cook, whom Mr. Trump is seeking to fire.

The Federal is facing both a challenging economic environment and threats to its traditional independence from day-to-day politics. At the same time that hiring has weakened, inflation remains stubbornly elevated. It rose 2.9% in August from a year ago, according to the consumer price index, up from 2.7% in July and noticeably above the Fed’s 2% target.

It’s unusual to have weaker hiring and elevated inflation, because typically a slowing economy causes consumers to pull back on spending, cooling price hikes. Mr. Powell suggested last month that sluggish growth could keep inflation in check even if tariffs lift prices further.

Separately, Mr. Trump’s attempted firing of Ms. Cook is the first time a President has tried to remove a Federal Governor in the central bank’s 112-year history and has been seen by many legal scholars as an unprecedented attack on the Federal’s independence.

Also read: U.S. Judge blocks Trump from removing Fed Governor Lisa Cook, for now

His administration has accused Ms. Cook of mortgage fraud, but the accusation has come in the context of Mr. Trump’s extensive criticism of Mr. Powell and the Federal for not cutting rates much faster and steeper.

An appeals court late Monday (September 15, 2025) upheld an earlier ruling that the firing violated Ms. Cook’s due process rights. A lower court had also previously ruled that Trump did not provide sufficient justification to remove Ms. Cook. Also late Monday (September 15, 2025), the Senate voted to approve Mr. Miran’s nomination, and he was quickly sworn in Tuesday (September 16, 2025) morning.

On Tuesday (September 16, 2025), Mr. Trump said Federal officials “have to make their own choice” but added that “they should listen to smart people like me.” Mr. Trump has said the Federal should reduce rates by three full percentage points.

The Federal’s move to cut rates puts it in a different spot from many other central banks overseas. Last week, the European Central Bank left its benchmark rate unchanged, as inflation has largely cooled and the economy has seen limited damage, so far, from U.S. tariffs.

On Friday (September 19, 2025), the Bank of England is also expected to keep its rate on hold as inflation, at 3.8%, remains higher than in the United States.

Published – September 18, 2025 01:02 am IST

Washington:

Donald Trump’s imminent return to the White House and uncertainty about his policy proposals has begun weighing on the US Federal Reserve, raising concerns of a reckoning between the central bank and the president-elect.

Fed chair Jerome Powell acknowledged on Wednesday that Trump’s economic platform, which includes the threat of major tariff hikes, the extension of tax cuts, and mass deportation, had been a consideration when members of the rate-setting committee met to consider the number of interest rate cuts they expect next year.

“Some did identify policy uncertainty as one of the reasons for their writing down more uncertainty around inflation,” Powell said after the Fed announced it was cutting rates by a quarter point and signaled just two cuts in 2025.

“We don’t know what’ll be tariffed from what countries, for how long, and what size,” he said. “We don’t know whether there will be retaliatory tariffs, we don’t know what the transmission of any of that will be into consumer prices.”

Previously, Powell had refused to comment on how the Fed was thinking about the potential impact of the next administration’s economic policies.

Trump has continued to insist that, “properly used,” tariffs would be positive for the US economy.

“Our country right now loses to everybody,” he told reporters at his Florida residence earlier this week. “Tariffs will make our country rich.”

Given the uncertainty over Trump’s plans, the decision by many policymakers to pencil so few cuts may have been a signal that they are willing to keep rates higher if the new administration puts forward policies that are inflationary, Steve Englander, head of G10 FX Research at Standard Chartered bank, told AFP.

“There are reasons not to be that pessimistic, and yet they chose to be that pessimistic,” he said. “So it’s hard to sort of avoid the signal that maybe they wanted to send a message.”

The US central bank has a dual mandate from Congress to act independently to tackle inflation and unemployment. But it must still consider how the economy could be affected by government policies.

Fraught relationship

Trump has had a long and often fraught relationship with Powell, whom he first appointed to lead the independent US central bank, frequently criticizing him during his first term for not cutting interest rates quickly enough.

The Republican has also said he has “better instincts” on the economy than many Fed governors, and argued that the US president should have “at least” a say in setting interest rates — something he cannot currently do.

“We haven’t explicitly written about any sort of disagreement between the White House and the Fed,” Bank of America senior US economist Aditya Bhave told AFP. “But you could easily end up in a world where they want different things.”

However, he added, there is still such “huge uncertainty” about which policies will be enacted that it is difficult to predict what the impact will be.

In Trump’s orbit, there is also strong disagreement that some of the proposed policies are actually inflationary.

Fed officials “are assuming that the Trump agenda will cause inflation despite no evidence,” said Stephen Moore, an economic adviser to the president-elect and an economist at the conservative Heritage Foundation.

“We had almost no inflation in Trump first term,” he told AFP in a message.

“And it’s absurd to think tax cuts cause inflation,” he added, referring to the incoming administration’s plans to extend tax cuts which are due to expire at the end of next year.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

An employee counts U.S. dollar bills at a foreign exchange counter inside a bank in New Delhi. File photo
| Photo Credit: REUTERS

The rupee fell 5 paise to an all-time low of 84.37 against the US dollar in early trade on Friday (November 8, 2024), weighed down by persistent foreign fund outflows and a muted trend in domestic equities.

Forex traders said the US Federal Reserve’s recent decision to cut interest rates signals a shift in the global financial landscape. Moreover, with Donald Trump’s tax and trade policies influencing global markets, volatility could re-enter the rupee’s trajectory.

At the interbank foreign exchange, the rupee opened at 84.32 against the greenback, then it fell further to an all-time low of 84.37, registering a rise of 5 paise over its previous close.

On Thursday, the rupee slipped 1 paisa to close at a fresh lifetime low of 84.32 against the US dollar.

“The spotlight will now be on the Reserve Bank of India (RBI) and how effectively it navigates this shifting currency landscape. In such a dynamic environment, only those who adapt swiftly will thrive in the market ahead,” CR Forex Advisors Managing Director Amit Pabari said.

In its latest monetary policy announcement, the US Fed reduced its benchmark rate by 0.25 basis points to a target range of 4.5 per cent-4.75 per cent.

In its accompanying statement, the Fed adopted a neutral-to-dovish tone, acknowledging balanced risks in inflation and employment.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading marginally higher by 0.02 per cent at 104.53.

Brent crude, the global oil benchmark, fell 0.65 per cent to USD 75.14 per barrel in futures trade.

“In this dynamic environment, volatility in the USD/INR pair is expected, with the RBI likely maintaining a range between 83.80 and 84.50. If the dollar’s momentum stalls amid future Fed rate cuts and weakening investor confidence, the rupee could gradually strengthen toward the lower end of this range,” Pabari said.

On the domestic equity market front, Sensex declined 14.23 points, or 0.02 per cent, to 79,527.56 points. The Nifty fell 15.45 points, or 0.06 per cent, to 24,183.90 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 4,888.77 crore, according to exchange data.

Foreign Portfolio Investors (FPIs) have infused ₹27,856 crore in domestic equities in the first fortnight this month, owing to the resilience of the Indian market and growing optimism around the potential interest rate cut in the U.S.

FPIs have been consistently buying equities since June. Before that, they pulled out ₹34,252 crore in April-May.

“With the focus shifting to the U.S. Federal Reserve’s decision on interest rates in its upcoming Federal Open Market Committee (FOMC) meeting next week, its outcome will likely play a pivotal role in shaping the trajectory of future FPIs investments in Indian equities,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.

According to the data with the depositories, FPIs put in a net investment of ₹27,856 crore into equities this month (till September 13). With this, FPIs’ investment in equities reached ₹70,737 crore so far this year.

V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, has attributed two major reasons for FPIs’ strong buying. First, there is a consensus now that the U.S. Fed will start cutting rates from this month onwards, pushing the U.S. yields down.

Recent data showing the U.S. inflation cooling for the fifth consecutive month, hitting a 43-month low of 2.5% year-on-year in August, has strengthened expectations that the U.S. Federal Reserve may proceed with a rate cut at its upcoming policy meeting. This will facilitate fund flows from the U.S. to emerging markets.

“Secondly, the Indian market is extremely resilient with strong momentum and missing out on the Indian market would be a bad strategy for FPIs,” he added. High valuations in India, however, continue to be a concern.

“The robust inflows are due to underlying factors such as global confidence in India’s economic outlook and the government’s commitment to drive a long-term growth story. FPIs are encashing at the right time to tab the Indian market amidst positive market sentiments, political stability, contributing to the rally,” Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India, said.

Also, a series of regulatory reforms aimed at streamlining the process for FPI investments has further uplifted investor sentiment.

Apart from equities, FPIs invested ₹7,525 crore in debt through the voluntary retention route in the first two weeks of September and ₹14,805 crore in government debt securities designated under the Fully Accessible Route (FAR).

The U.S. Federal Reserve is widely expected to keep its key short-term interest rate unchanged when it meets next week. File
| Photo Credit: Reuters

An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth.

Friday’s report from the Commerce Department showed that prices rose 0.4% from August to September, the same as the previous month. And compared with 12 months earlier, inflation was unchanged at 3.4%.

Taken as a whole, the figures the government issued Friday show a still-surprisingly resilient consumer, willing to spend briskly enough to power the economy even in the face of persistent inflation and high interest rates. Spread across the economy, the strength of that spending is itself helping to fuel inflation.

In a cautionary note, consumers relied increasingly on savings to fuel their shopping last month. Income growth slowed. Adjusted for inflation, income actually fell slightly.

Yet spending jumped 0.4%, after adjusting for inflation. The saving rate fell to 3.4%, down from the 6%-plus average before the pandemic.

“That is clearly unsustainable, and we expect spending growth will slow sharply in the quarters ahead,” said Michael Pearce, lead U.S. economist at Oxford Economics, a consulting firm.

September’s month-to-month price increase exceeds a pace consistent with the Fed’s 2% annual inflation target, and it compounds already higher costs for such necessities as rent, food and gas. The Fed is widely expected to keep its key short-term interest rate unchanged when it meets next week. But its policymakers have flagged the risk that stronger growth could keep inflation persistently high and require further rate hikes to quell it.

Since March 2022, the central bank has raised its key rate from near zero to roughly 5.4% in a concerted drive to tame inflation. Annual inflation, as measured by the separate and more widely followed consumer price index, has tumbled from the 9.1% peak it reached in June of last year.

On Thursday, the government reported that strong consumer spending drove the economy to a robust 4.9% annual growth rate in the July-September quarter, the best such showing in nearly two years. Heavy spending by consumers typically leads businesses to charge higher prices. In Friday’s report on inflation, the government also said that consumer spending last month jumped a robust 0.7%.

Spending on services jumped, Friday’s report said, led by greater outlays for international travel, housing and utilities.

Excluding volatile food and energy costs, “core” prices rose 0.3% from August to September, above the 0.1% uptick the previous month. Compared with a year earlier, though, core inflation eased to 3.7%, the slowest rise since May 2021 and down from 3.8% in August.

A key reason why the Fed may keep rates unchanged through year’s end is that September’s 3.7% year-over-year rise in core inflation matches the central bank’s forecast for this quarter.

With core prices already at that level, Fed officials will likely believe they can “proceed carefully,” as Chair Jerome Powell has said they will do, and monitor how the economy evolves in coming months.

Still, the data in Friday’s report showed that while prices for many goods, including cars, furniture and appliances are actually falling, the price increases for services remain chronically high.

Restaurant meals, for example, rose 0.4% in price from August to September, up from a 0.2% rise the previous month. They are now 5.8% more expensive than they were a year earlier.

One measure the Fed is monitoring closely — services prices, excluding energy and housing — jumped 0.4% last month, after rising only 0.1% in August. The Fed watches that gauge because it tracks prices in a set of industries that are labor-intensive and particularly sensitive to rising wages. Higher wages can fuel inflation if businesses pass on their higher labor costs by raising prices.

A solid job market has helped fuel consumer spending, with wages and salaries having outpaced inflation for most of this year. Yet Friday’s report showed that the growth in overall income — a category that, in addition to wages, includes interest income and government payments — has slowed. Adjusted for inflation, after-tax income slipped 0.1% in September, the third straight monthly decline. Shrinking incomes could weaken spending and growth in the months ahead.

Representational image only. File
| Photo Credit: Reuters

Equity benchmark indices declined in early trade on September 21, falling for the third day running, due to a weak trend in global markets and foreign fund outflows.

Global equities fell after the U.S. Federal Reserve signalled that they expect to raise rates once more this year to fight inflation.

The 30-share BSE Sensex fell 333.64 points to 66,467.20. The Nifty declined 99.8 points to 19,801.60.

Among the Sensex firms, HCL Technologies, ICICI Bank, Tata Consultancy Services, Larsen & Toubro, UltraTech Cement, Nestle, HDFC Bank and ITC were the major laggards. State Bank of India, Tata Steel, Axis Bank and NTPC were among the gainers.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading in the negative territory. The U.S. markets ended in the red on Wednesday.

The Federal Reserve left its key interest rate unchanged on Wednesday for the second time in its past three meetings, a sign that it’s moderating its fight against inflation as price pressures have eased. But Fed officials also signalled that they expect to raise rates once more this year.

“Even though the ‘hawkish pause’ from the Fed was on expected lines, the U.S. markets reacted negatively since the indication from the Fed is that rates will remain ‘higher for longer’.

“For Nifty the biggest drag will be more FII selling in response to the rising dollar and U.S. bond yields,” said V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Global oil benchmark Brent crude declined 0.71% to $92.87 a barrel. Foreign Institutional Investors (FIIs) offloaded equities worth ₹3,110.69 crore on Wednesday, according to exchange data.

“A rough start to the trading session is on the cards as overnight weakness in the U.S. markets has triggered a slump in other Asian counterparts after the U.S. Federal Reserve hinted at one more rate hike by the end of this year even as it kept rates unchanged in its FOMC (Federal Open Market Committee) meeting yesterday.

“Another negative catalyst has been the frenzied selling by foreign institutional investors as they sold shares worth ₹3,110.69 crore in the domestic equity markets on Wednesday, which could further dampen the sentiment,” Prashanth Tapse, Senior VP (Research), Mehta Equities Limited, said in his pre-opening market comment.

The BSE benchmark had tumbled 796 points or 1.18% to settle at 66,800.84 on Wednesday. The NSE Nifty declined 231.90 points or 1.15% to end below the 20,000 mark at 19,901.40.

Washington:

The US Federal Reserve voted Wednesday to keep interest rates at a 22-year high, while forecasting an additional rate hike before the end of the year to bring down inflation.

The Fed’s decision to keep its key lending rate between 5.25 percent and 5.50 percent gives policymakers time to “assess additional information and its implications for monetary policy,” the central bank said in a statement.

After 11 interest rate hikes since March last year, inflation has fallen sharply but remains stubbornly above the Fed’s long-run target of two percent per year — keeping pressure on officials to consider further policy action.

On Wednesday, the Fed said economic activity had been expanding “at a solid pace,” while noting strong job gains and a low unemployment rate.

A recent string of positive economic data has raised hopes that policymakers can slow price increases without triggering a damaging recession.

Alongside its interest rate decision, the rate-setting Federal Open Market Committee (FOMC) also updated members’ forecasts for a range of economic indicators, as well as expectations of future monetary policy.

FOMC members left the median projection for interest rates between 5.50 percent and 5.75 percent, keeping alive the possibility of another quarter percentage point hike before year-end.

They also lifted expectations for interest rates next year by half a percentage point, suggesting the Fed anticipates rates will have to stay significantly higher for longer in order to lower inflation to target.

FOMC members more than doubled the median projection for economic growth this year as well to 2.1 percent, from 1.0 in June, and sharply raised their forecast for next year.

The prediction for the unemployment rate in 2023 was lowered slightly from June, suggesting the jobs market is faring better than hoped, while the expectation for headline inflation was increased slightly.