Following last week's Federal Open Market Committee (FOMC) meeting and rate decision, the interest rates were retained at 5.5% as expected. Powell, the chairman of Federal Reserve, mentioned that if the economy continues to progress as anticipated, the Fed might reduce rates three times this year.
The economic data from January has pushed Fed into a stale mate situation, with choppy employment numbers, inflation, PCE. Keeping rates high when unnecessary could push the US into a recession, while lowering them excessively could lead to inflation. Currently, we're just in a phase and waiting for the pivoting data.
This week, on Friday, March 29th, which coincides with Good Friday, we're anticipating the release of US PCE (Personal Consumption Expenditure) data. Analysts are looking for a positive shift in the economy, with expectations of continued improvement in the upcoming months. Predictions for February suggest a 0.4% increase in both PCE and Core PCE compared to the previous month, and a 2.4% rise compared to the same time last year. Core PCE expectations are slightly higher at 2.8% for year-on-year data.
Turning to the Indian markets, recent data on loans and deposits show a 13.7% year-on-year growth in deposits and a 20.4% increase in loans provided by commercial banks as of March 8, 2024. There are no significant economic events scheduled for India this week.
Regarding the note on mid-cap and small-cap issues from last week, we now have a clearer understanding. Mutual fund companies conducted stress tests and found that, on average, they could liquidate 50% of their portfolios within 14 to 28 days. Additionally, they're required to disclose these stress test results monthly, within the first 15 days of the following month.
Here is an excerpt from a Forbes article discussing the events of the previous irrational exuberant rally in the small and midcap market during CY 2018.
We’ve got to see what’s waiting for us this cycle. As, We can never forecast exactly how much the correction is likely or more if there is any in first place.
Date : 24th Mar '24; Source - Trading Economics, Forex factory, Forbes
LR