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Chief economic adviser flags US rate hikes, oil prices as headwinds for Indian economy -Shubham Batra

-ThePrint.in

V. Anantha Nageswaran says he is surprised by Fed's hawkishness in hiking rates. With US inflation hitting 4-decade high in February, Fed raised rates in March and plans more hikes.

New Delhi: Expectations of the United States Federal Reserve hiking rates aggressively in 2022-23 to contain inflation, and volatility in global crude oil prices as result of the Russian invasion of Ukraine, are two strong headwinds confronting the Indian economy in the short term, Chief Economic Adviser V. Anantha Nageswaran said Tuesday.

Nageswaran, who joined the Ministry of Finance just ahead of the presentation of the Union Budget 2022, said that he was surprised at the hawkishness of the Fed’s stance on rate hikes in response to inflation in the US, which hit a 7.9 per cent annual rate in February — a four-decade high.  

“I was surprised at the extent of hawkishness of the Fed in their projections. It remains to be seen whether the reactions of markets will allow them to hike the fed funds rate to 2.75 per cent. So, I am waiting to see the peak of this cycle. Two more reviews will give a clear picture on the Fed’s action,” he said at an event organised by the All India Management Association in Delhi.

The Federal Reserve in March hiked the federal funds rate by 25 basis points (a quarter percentage point), a first in more than three years, after keeping it near zero since the beginning of the Covid-19 pandemic. The Federal Open Market Committee, which decides the key policy rates in the US, also said that it would further increase rates six times in consecutive review meetings this year.

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