Week ahead: US Fed interest rate decision to weigh on Sensex, Nifty

The stock market‘s direction will be determined by global cues next week. The United States Federal Reserve‘s policy-making body, the Federal Open Market Committee (FOMC), will make its announcement on September 20-21.

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Traders expect the US Federal Reserve to raise interest rates again, for the third time in a row, to combat growing inflation. Other significant central banks, notably the European Central Bank, are expected to follow the US Fed’s aggressive policy decision. 

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In the previous week, foreign institutional investors (FIIs) net sold Rs 1,900 crore worth of shares, while domestic institutional investors (DIIs) offloaded shares worth Rs 2,900 crore, keeping the market sluggish.

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Oil prices have remained below $100 per barrel this month and have fallen below $90 per barrel, owing to concerns that aggressive interest rate rises may have an impact on the global economy and undermine the outlook for oil consumption.

Analysts predict that oil prices will fall further in the next weeks due to growing recession and slowdown concerns in Western nations.

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“As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm,” the World Bank said in a new report.

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Japan will release its inflation figures on Tuesday, September 20, 2022, in other Asian markets. Japan’s annual inflation rate increased to 2.6% in July 2022, up from 2.4% in June.

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On Thursday, September 22, 2022, the Bank of Japan (BoJ) will make an interest rate decision. During its July meeting, the Bank of Japan kept its benchmark short-term interest rate at -0.1% and its 10-year bond yields at about 0%.

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The Bank of England (BoE) will announce the Monetary Policy Committee’s decision on September 22, 2022.

China, which relies heavily on global exports, will release its FDI data on Monday, September 19, 2022.