I think that uncertainty lingers on. What we do know is that the Fed seems to be signalling that it will be pausing, at least for a while. The Fed acknowledges that inflation had been a little higher, but its belief is that the economy is slowing down and that will contain inflation. So it may take a little while to figure out whether the Fed is right. Many people anticipate that the Fed maybe on pause for the rest of the fall. But personally, I think that Fed believes that much of the problem on the inflation side is related to oil prices and hopes that this will settle down and then we will get a better sense of where the economy is.

James Glassman

Senior Economist, JP Morgan Chase Bank

As long as we see the employment rates stabilising in the current range or anything looking slightly up, the Fed will not be overly concerned, even if inflation itself is a bit higher than it is normally comfortable with. It sees inflation as a lagging indicator of growth. What it calls resource utilisation, which translates into either the unemployment rate or the capitalisation rate, are the key things it is watching at this stage.

Peter Morgan

Chief Economist, Asia-Pacific Region, HSBC

For now, the Fed is on a `wait-and-watch' mode; it is trying to see what the impact on the real economy is likely to be. We think the Fed will pause for now but then restart hiking rates in December and continue to do so until March 2007, taking the Fed funds target way up to 6 per cent. But will that impact Indian markets?

We think the RBI will continue to look closely at domestic developments. Of course, it will consider the Fed, the ECB and the Bank of Japan. But, on balance, we think the market should be more convinced now that perhaps the RBI will choose not to raise rates in October and wait and watch economic developments in India in the same way as the Fed will. We see the RBI raising rates further but not before the January review.

Siddharth Mathur

Research Head, JP Morgan

Generally, not just for India but for the global emerging markets, we are likely to see a repeat of what happened in May to June at least one more time. So as the market realises globally that the Fed is not done and there is going to be the greater attractive yield in the major currencies, funds flow into emerging markets, including India, will suffer in the next quarter or two.

V. Anantha Nageswaran

Head, Research, Bank of Julius Baer, Singapore

Precious metals definitely look at FOMC statements very closely... they have come out with a statement that says, "inflation risk still remains." So this room of uncertainty that they have left open, probably till the next FOMC meeting, will weigh down on precious metals. And we think that in the next couple of weeks the trend will be weak for gold; we look at the October gold targeting levels of $600-614.

Rajini Panicker

Man Financial

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