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BFSI Chronicle, 11 Edition September 2022
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Tremors were felt in the US equity markets as well, the rising mortgage rates. The apprehension of a hard
with all the benchmark indices (Dow Jones, S&P 500 landing of the economy waned briefly, particularly
and Nasdaq Composite) falling in the range of 20-30 due the less hawkish commentary in FOMC meet in
per cent (typical of a bear market) from their Jan ‘22 July. The markets bounced back from its June lows
peaks. The subsequent rate hike of 75 bps in July in expectation of a possible peaking of inflation. US
placed the Fed fund rate at a range of 2.25-2.50 per Inflation softened to 8.6 per cent in July against 9.1
cent as the US central bank seeks to cool down the per cent in June.
economy and bring down the inflation to the targeted
2 per cent level. As a part of Quantitative Tightening, When things were appearing to be normalising, the
the Fed is also unwinding a $9 trillion balance sheet US Fed set cat among the pigeons with a hawkish
on a monthly basis. narrative at the Jackson Hole Economic Symposium
in last week of Aug. The Fed chair Jerome Powell
As an outcome of these measures, US economy statement pointed to the need of an extended period
contracted -6 per cent in Q1 of CY2022 followed of tight monetary policy to tame the sticky inflation,
by a contraction of -0.9 per cent in Q2, which point even at the cost of slowing down the economy and
to a ‘technical recession’. The brief but repeated labour markets. The fear of “not so soft” landing of
inversion of the US Yield Curve in 2-10 years range the US economy resurfaced which spooked the global
also signalled towards recessionary forces at play. markets all over again.
Consequently, the world markets reacted adversely
and a new 52-week low was witnessed in mid-June The Domestic Macros
2022. However, the markets took comfort from Inflation in India and US are not moving in tandem
the US Labour market that remained tight with with US inflation outpacing the inflation at home.
unemployment rate comfortably placed at 3.5 per Nonetheless, actions by US Fed will continue to
cent, much below the historical average of 5.8 per impact the way RBI acts. Aggressive monetary policy
cent. The US property markets also held up despite in US will restrict RBI to take any accommodative

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