Fed rate hike to have minimal impact on RBI policy: India Inc

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New Delhi | Published: March 16, 2017 10:28:46 PM

Ficci said the monetary policy stance of the RBI is likely to be determined by a host of factors, the Fed rate hike being one of them.

The Fed rate hike is not likely to have any significant impact on the Indian economy. (Reuters)

The interest rate hike by the US Fed is not likely to create much volatility in Indian markets and will have only a minimal impact on the RBI’s monetary policy stance, industry bodies said today. Ficci said the monetary policy stance of the RBI is likely to be determined by a host of factors, the Fed rate hike being one of them. “Since Fed rate hike is not expected to create much volatility in the Indian markets, this should have minimal influence on RBI’s policy stance,” the chamber said in a statement. It hoped that RBI will adopt an accommodative stance in its forthcoming monetary policy, scheduled to be announced on April 6. It also said that the Fed rate hike is not likely to have any significant impact on the Indian economy.

“While there could be some capital outflows, India is expected to be least impacted amongst the emerging markets,” it added. On the impact on India’s exports, Ficci said the rate hike corroborates better growth prospects of the US economy, which in turn will have positive implications on global trade, including exports from India. Exporters’ body FIEO too hoped that the Reserve Bank would not hike rates. “The impact of Fed hike will be almost negligible on India as FDI and FII inflows in India will continue unabated…,” the Federation of Indian Export Organisations (FIEO) said.

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Assocham said the hike in interest rates by the US Fed is on expected lines and should not make a difference to the stance taken by the RBI. As widely expected, the Federal Reserve raised its benchmark interest rate for the second time in three months and forecast two additional hikes this year. The US Fed’s key short-term rate was hiked by 0.25 per cent to a still-low range of 0.75 per cent to 1 per cent.

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