Indian equity markets also need support from the US market to rally further. The last leg of the rally in India was a result of the rally in the US markets. When the US markets retreated a bit on Thursday, the Indian markets fell on Friday. With the strong drop in the US on Friday, we could see a corresponding drop in India on Monday.<br /><br />
White House officials are mustering support among Democrats on the Senate Banking Committee to back Federal Reserve Vice Chair Janet Yellen, three sources said on Friday, laying the groundwork for her expected nomination to the Fed's top job.
The fact is that the Indian economy is now on steroids administered by the US Fed. It is not sustainable therapy, but what it does do is give room for policymakers in Delhi and Mumbai to set their house in order; start pushing the fundamentals to where they ought to be.
The Federal Reserve of United States prints $85 billion every month. It puts this money into the financial system by buying bonds. With all this money going around interest rates continue to remain low. And at low interest rates the hope is that people will borrow and spend more money.
At best, Rajan is, therefore expected to ease the daily CRR stipulation, providing banks some breathing space on liquidity.
Ben Bernanke can't taper bond buying for the short-term consequences are a huge spike in bond yields and recession
That initial exuberance masks a nagging worry and no shortage of confusion about the Fed's reluctance to act after the central bank had positioned markets for a reduction in its $85 billion per month bond buying program. It left many investors in a fog about what comes next.<br /><br />
The "easy money" being provided by the Federal Reserve will continue showing up in all kinds of places.
The US Federal Reserve said on Wednesday that it would continue buying bonds at an $85 billion monthly pace for now, surprising financial markets that were braced for a reduction in the central bank's economic stimulus.
In a surprise move, the US Federal Reserve on Wednesday decided to continue with its $85 billion bond buying programme and also cut its economic growth outlook for the US economy. Analysts were expecting the central bank to cut its Treasury paper buying by at least $10 billion.
The Fed's announcement on Wednesday that its stimulus measures will stay in place should help battered emerging markets like India and Brazil.
Asian markets kept their nerve on Wednesday counting on the Federal Reserve to launch only a modest scaling back of stimulus later in the day, though all assets were vulnerable to any hint of hawkishness from the world's most powerful central bank.<br /><br />
QE is unlike the Fed's traditional tool of raising and lowering short-term interest rates, and the public needs to understand its benefits, and risks, to better inform their decisions.
Pretty much everyone expects the Fed to take its first step toward slowing the economic stimulus it's supplied since the financial crisis and the Great Recession swept through the economy five years ago.
Markets around the world immediately cheered Larry Summers' withdrawal primarily because Summers was widely seen to be a 'hawk' -- someone who is likely to raise interest rates and cut down on money supply.
Though hiring and economic growth in the US remain soft, the Fed is expected to slow the pace of its $85-billion a month in bond purchases as early as Wednesday at the end of its policy meeting.
Caution ruled in stock markets, with MSCI's broadest index of Asia-Pacific shares outside Japan flat at 464.14. Japan's Nikkei firmed 0.8 percent while Australian shares were a fraction lower.<br /><br />
Yellen, who has a long career in the Fed system and chaired the White House Council for Economic Advisers under Clinton, would be the first woman to hold the job.
A new man with a new message always raises hopes; but Raghuram Rajan cannot single-handedly change our economic destiny.