As US markets jumped on Wednesday morning, a key Federal Reserve official indicated, without connecting the two, that the rate hike expected in September looked less likely now.
Debate about a rate hike, intensified over the last few days as markets the world over were roiled by a slump in Chinese stocks caused by a slowdown.
India will be watching the Fed closely. Though better prepared now for a flight of funds that a rate hike could cause, it remains concerned about its impact on growth prospects.
“The decision to begin the normalisation process at the September meeting seems less compelling to me than it was a few weeks ago,” said New York Fed president William Dudley.
The Fed’s top decision making body, the Federal Open Market Committee, is to meet in September to consider a rate-hike that has long been in the pipeline as the economy improved.
Dudley, who is a close ally of Fed chief Janet Yellen, was at the news briefing and had nothing to say about the turmoil in the stock market, which opened high as on Tuesday.
The Dow Jones had opened high, but ended the day 1.3% lower than its last close.
It began well once again on Wednesday and rose 358 points, or 2.3%, to 16,024, while the S&P 500 was up 2.2% and the Nasdaq Composite climbed 2.3%.
But traders and market watchers remained uncertain whether Wednesday won’t be a repeat performance. The New York Stock Exchange deployed Rule 48 for the third day running to stem the impact of pre-opening volatility.
“It looks just like yesterday at this time where things are weaker (in) general overseas, but people look optimistic at the open,” Charles Schwab’s Randy Frederick told CNBC.
The Chinese market (Shanghai Composite), that triggered the present round of global sell-offs including in India, closed down 1.3% after fluctuating all day.