After the US Federal Reserve's guidance on three rate hikes next year, a key member of its monetary policy committee was of the opinion that three hikes might not be enough to contain any possible rise in inflation.
According to Reuters, Richmond Fed President Jeffrey Lacker has said that the Fed would need more than three hikes next year. "If we get behind, it's hard to really calibrate," Lacker was quoted as saying.
On Wednesday, the US Federal Reserve raised its key interest rate by 0.25 percent and gave a guidance of three hikes during next year. Importantly, this was the maiden rate hike by the central bank this year, which was also the case in 2015.
"Fed would still be able to raise rates gradually, but perhaps not as slowly as is expected by the majority of policymakers," Lacker added.
After recession hit the US economy on the back of subprime crisis, interest rates in the US market was near zero since 2008.
On possible fiscal stimulus measures by US President-elect Donald Trump, the report said new fiscal measures were likely to be announced to boost the economy.
Notably, interest rate hike by the US central bank usually results in outflow of foreign institutional investors' (FIIs) money from emerging economies as bond yields and equities in the US market give better returns.
Some analysts also predict a strengthening dollar may force rupee to depreciate, leading to higher current account deficit and inflation. "Foreign investors in Indian markets will withdraw their money and invest in the US market. In addition, the depreciation of the rupee will lead to higher current account deficit and higher inflation," an Economic Times report quoted Abnish Kumar Sudhanshu, Director at Amrapali Aadya Trading & Investments, as saying.
