Anatomy of rate hike cycles – are we done already?

The Federal Open Market Committee (FOMC) is expected to announce a 25-basis-point rate hike on May 3rd, according to consensus estimates. A coordinated global rate hike can have three effects: the slowdown of economies, capital flowing to more stable currencies, and accidents prone to happen. The Reserve Bank of India (RBI) has managed the situation well so far with only a 250 bps Repo rate increase. However, challenges may arise due to India’s dependence on foreign portfolio investments (FPI) to maintain its balance of payments. If a perfect storm were to happen, RBI would need to take strong action.