Global economy was once again beginning to stare at the possibility of economic slowdown as fears re-emerged over the possibility of economic recession in the US owing to another banking crisis, a research note by Jahnavi Prabhakar, Economist, Bank of Baroda, said.
US officials are already in talks of providing a possible FDIC receivership to First Republic. A lot is at stake for Fed now, as it considers the next rate action given the stubbornly high inflation, elevated wage growth, credit crunch scenario and uncertainty in global growth, the note said.
Rupee has relatively performed better than the Asian peers and is expected to trade in the range of 81.5-82.25 to the dollar in the next fortnight. Markets will now wait for Fed's and ECB's rate decision next week.
Global markets turned cautious once again amid renewed concerns of banking crisis looming for the second time in the last two-months along with the debt ceiling standoff in the US.
Additionally, other major data releases including US GDP, PCE, jobless claims and employment cost index is expected to strengthen the case for a rate hike by Fed as inflation pressure remains stubbornly high. With this, the federal fund rate will be in the range of 5 per cent-5.25 per cent, thus making the credit crunch, a more realistic situation, the note said.
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