Fed gives policy warning: will make the rate hike soon

The Chair of the US Fed, Janet Yellen indicated that the US central bank is going to make its anticipated rate hike soon.  She signalled that an increase in short-term interest rates could “become appropriate relatively soon”, asserting that the US central bank is reluctant to delay it for too long.

The Fed is trying to reduce unemployment while achieving a minimum level of inflation.  The two set goals are maximum employment and price stability. Next meeting of the Fed which is going to take the critical rate hike decision is scheduled for December 13-14.

In its latest policy review, the central bank stated that the case for higher rates had strengthened. The Fed is just waiting for further evidence of progress before pushing the second-rate hike of the year.  

Already financial markets across the globe, especially that of emerging market are witnessing capital outflows expecting rate hike policy by the Fed. In India, the rupee has lost some of its sheen in the last few days. Market are accommodating the rate hike impact much earlier.

On its side, the Fed is also giving constant small warnings about its future move so that sudden disturbances can be avoided in EMEs. The latest hint by the Fed is a complete indicator and this means that market should read the situation to avoid financial market disturbances on the decision announcement day. 

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