Quicker-than-expected US rate hikes?

Dear All,

Please find below a good article as appeared in Mint for your reading:

Quicker-than-expected US rate hikes?

The specter of US rate hikes has come a step forward, with the publication of a report by the Federal Reserve Bank of San Francisco that said investors were not on the same page as the US Fed on rate increases. The report concludes, “On balance, our evidence indicates that the public seems to expect more accommodative monetary policy than the SEP (Summary of Economic Projections by the US Fed) suggests. US bond yields have moved up, with the two-year treasury yield at the highest in the year, as chart 1 shows. 

The US dollar has strengthened, because while Europe and Japan continue to ease monetary policy, the US is preparing to tighten. Emerging market currencies and markets too fell on Wednesday. A recent note from JPMorgan says: “We believe EM (emerging market) assets have priced in a gradual rate hike starting in mid-2015 but a more hawkish Fed could still be disruptive. But while the Indian currency too fell, chart 2 shows a decoupling between the rupee on the one hand and the euro and yen on the other, with the dollar losing a bit of ground against the rupee in the past month, while it has gained substantially against the euro and yen. This also reflects the distance the Indian economy has traveled since last year’s panic.