Highlights

  • US markets see massive rally post Fed rate hike, Indian markets collapsed post RBI rate hike
  • Fed chair eases concerns of large rate hikes ahead

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Editorji Explains tale of two rate reactions: Dalal Street vs Wall Street

Dow Jones Industrial Average rose 932.27 points, or 2.81%, to close at 34,061.06

Two central bankers almost the same action and two very different reactions. Federal Reserve hikes rates by the most in 20 years and Wall Street witnessed a 3% rally vs Dalal Street that was whipsawed down by over 1000 points on the benchmark 30 stock index. So what where is the gap - between action and reaction Editorji explains.

Also read/watch | RBI shocks with repo rate hike, CRR hike

US Federal Reserve had braced the market for over a year for a turn in the rate cycle and also through dots and plots adjusted the bulls and bears for imminent rate hike of 50 bps. This in comparison to the shocker of a hike from RBI that came via an emergency meeting making traders wonder if the situation is more dire than they are evaluating as the central bank did not even wait for a month for it's June policy where a 25 bps rate hike was largely anticipated.

Also read/watch | Is there a social army riding online to defend Ola?

The other part signal came from commentary while Governor Das portrayed a grim outlook for inflation and prices thus setting the stage for aggressive hikes, Fed chief Powell did the opposite as he dispelled worries of a 75 basis point hike from the Fed and indicated it would just be 50 bps or possibly even 25 bps as he sees inflation already cooling.

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