Live: Hawkish RBI refuses to join party, hikes policy rates

by Sunainaa Chadha : first Post : 21 mins ago



Rangarajan welcomes RBI move, says growth will not be effected due to rise in repo rate 

11:12 am: “We cannot ignore the fact that overall inflation—both wholesale and retail— are high and hence a signal needs to be sent on this front, said C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.

 If inflation does not show any signs of coming down, further action will be required, added Rangarajan. He also stressed that growth will not be impacted with the 25 basis point hike in the repo rate due to the number of reforms taken up in the recent past to improve investment sentiment. “The need to control inflation is RBI’s biggest priority,” he said. 

Mkt update:

 Meanwhile, even though the  Sensex gained around 700 points yesterday, it has  lost around 520 points today after the RBI surpised markets by hiking the key repo rate by 25 basis points

. 11:00 am Hawkish RBI refuses to join party,  hikes policy rates The Reserve Bank of India refused to join the party and unexpectedly raised its policy rate by 25 bos to 7.5 percent. 

The central bank also eased the pressure on liquidity in the banking system by cutting the marginal standing facility rates for banks to 9.5 percent from 10.25 percent and also cut banks’ daily cash reserve ratio requirement to 95 percent of deposits from 99 percent. RBI says despite good monsoons leading to some moderation in CPI inflation, there is no room for complacency. “In the absence of an appropriate policy response, WPI inflation will be higher than initially projected over the rest of the year. 

What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence,” said the Reserve Bank of India in its quarterly monetary review. The RBI’s earlier measures had been criticised for sending confusing signals on monetary policy measures. 

The move is likely to set this anomaly right as it clearly means that the bank is more bothered about inflation than growth. The measures are likely to increase already high interest rates in the economy. “The need to anchor inflation and inflation expectations has to be set against the fragile state of the  industrial sector and urban demand. Keeping all this in view, bringing down inflation  to more tolerable levels warrants raising the LAF repo rate by 25 basis points immediately,” RBI said in a statement today. Markets plunged soon after with the Nifty falling 99 points at 6017 and the BSE Sensex plunging by 490 points down at 20302. Bank Nifty was the biggest sectoral loser. “Inflation worries have driven the RBI to hike interest rates, said Nomura. Commenting on the turbulence in financial markets, the RBI said that the decision by the US Federal  Reserve to hold off tapering has buoyed financial markets but tapering is inevitable. 

  RBI may roll back rupee volatility curbing measure

 10:45 am According to a CNBC-TV18 poll, a majority of the bankers and economists  expect Reserve Bank Governor Raghuram Rajan to partially roll back the measures taken in July to prop up the rupee. 

The RBI had restricted banks from borrowing at 7.25 percent from the repo window. It had forced them to borrow at a higher rate of 10.25 percent from a special window called marginal standing facility (MSF). Around 55 percent of those polled expect the central bank to cut the MSF rate. Some expect a 50 bps (basis points) cut, while others expect as much as 200 bps

. Only 45 percent expect the rate to be maintained at 10.25 percent. Around 60 percent of the market now expects RBI to bring down this daily requirement to 90 percent of CRR, while 20 percent expect it to come down below 90 percent. 

10:11 am  Economists expect a partial rollback of measures taken by the Reserve Bank (RBI) to stem the rupee’s fall. Aditi Nayar, senior economist at ICRA believes there will be a gradual reversal of all these measures. Most likely, the average daily cash reserve ratio (CRR) might reverse on Friday, she said in an interview with CNBC-TV18. She does not expect a change in the marginal standing facility (MSF) on the back of mixed signals from inflation in the past couple of months.

 Even Dalton Capital Advisors expects the RBI to ease some tightening measures today. “The US Federal Reserve’s move to not taper its bond buying program has given the Reserve Bank room to ease some of the rupee volatility curbing measures, said UR Bhat, managing director, Dalton Cap.” CLSA economist Rajeev Malik expects the RBI to take a hawkish stance at its policy review meet today, as inflation continues to pose a major headache. “The pleasant current wave of global risk-on doesn’t change the hard reality of the uncomfortably high inflation for the RBI,” he wrote in a note to clients this morning. 

He, however, does not expect the RBI to announce a reversal of its recent liquidity tightening measures in a hurry. In July, RBI had raised short term borrowing rates for banks also stiffened the CRR norms. “An outright dismantling of the convoluted short-term interest rate defence announced in July is more likely only in November/December. This is because there will be greater clarity on the overseas capital inflows, especially from non-resident Indians, via the RBI’s temporary swap windows,” Malik wrote.

 He expects the rupee to strengthen to around 60 to the dollar near term, but expects it to slide into a range of 65-68 over the next 6 months. And that may not be a bad thing for the rupee he argues. Sensex flat, rupee marginally weak, caution rules  

9: 20 am Indian markets opened in the red as the new Reserve Bank of India chief Raghuram Rajan makes his first monetary policy statement at 11 am today with expectations he may scale back some of the emergency measures that have helped the rupee bounce from a record low. While the BSE Sensex opened  0.40 percent lower at 20561,  Nifty opened down 0.34 percent at 6096. 

Market experts have advised investors to book profits and reshuffle their portfolio today after the RBI announcement. The rally on Thursday was one of the biggest in recent times and any cooling will only be healthy for the market. Even the rupee opened weak at 62.09 against the USD against Thursday’s close of 61.71. On Thursday, the rupee surged as much as 2.8%, hitting its highest in a month as Ben Bernanke’s surprise decision on Wednesday not to wind down its monetary stimulus has come as a shot in arm for  Rajan. However, the Fed’s decision also means that expectations from Rajan have risen manifold. 

“There is certainly the danger of a more relaxed stance from the policymakers till the next round of tapering concerns hit the markets. They should just see this as a 2-3 months reprieve,” said Robert Prior-Wandesforde, economist at Credit Suisse in Singapore

. “The RBI should not use this to ease monetary conditions. The rupee has only retraced a month’s losses and is certainly not strong or stable. My sense is RBI will not touch the key rates but the tone will be somewhat more dovish,” Prior-Wandesforde was quoted as as saying by Reuters. The principal economic adviser at the Ministry of Finance, Dipak Dasgupta, said the Fed decision “was a huge surprise” and a “very positive decision.” He said it could add half a percentage point to India’s economic growth in the near term. Rupee opens weak at 62.09 as cautious market awaits Rajan’s maiden policy 

 9:00 am The US Fed move to keep liquidity taps on has driven financial markets across the world to new highs; and India is no exception. Indian equity markets surged to their highest level in nearly three years on Thursday, led by banks, after the US Federal Reserve stunned markets by delaying plans to cut asset-purchase programme. The rise was in tune with global markets. Foreign institutional investors (FIIs) bought equities worth $574 million on Thursday. FIIs had bought equities worth $1 billion up to the FOMC’s meet.

 According to a report in the Business Standard, of the $4-billion selloff since May, Indian equities have already recouped $1.6 billion. However the markets today may open flat today as it waits in  anticipation for RBI’s Monetary Policy today as the new governor Raghuram Rajan makes his debut. The currency markets too seem cautious this morning as the rupee opened 32 paise weaker at 62.09 against the US dollar after closing at 61.78 on Thursday. Rajan is expected to hint at some rollback of measures imposed in defence of the rupee while key policy rates may be left unchanged.

 “There is a change of guard, so we don’t know what the flavour will be, but Rajan is likely to be hawkish and reiterate the importance of low and stable inflation for sustained economic recovery,” said Rajeev Malik, senior economist at CLSA in Singapore. Finance Ministry has expressed hope that Reserve Bank of India (RBI) will focus on promoting growth.

 Meanwhile, US stocks retreated slightly on Thursday as investors paused after the Federal Reserve’s decision to keep its stimulus intact sparked a rally that lifted the Dow and S&P 500 to record highs. 

End of updates on 19 September, 2013 5. 50 pm: Sensex ends at 34-month high as Big Ben chickens out of taper Indian shares surged over 3 percent today with the benchmark index marking its highest close in nearly three years, led by banks, after the U.S. Federal Reserve surprised the markets by sticking to its stimulus plan. The rupee surged 2.6 percent, hitting its highest in nearly five weeks. 

The Fed’s move also means that the RBI will have greater flexibility if it wants to roll back some of the cash tightening steps it initiated since mid-July to stabilise the plunging rupee. The RBI’s decision to bump up its emergency funding rate by 200 basis points to 10.25 pct and cap banks’ borrowing from it roiled bond markets and pushed up corporate borrowing costs, adding to strains on the already slowing economy. State Bank of India, the country’s largest lender, on Thursday raised its base rate, or the lowest rate at which it lends, by 10 basis points to 9.80 percent.

 “A delay in the tapering agenda paves the way for the RBI to relook at the liquidity tightening measures put in place in July and possibly ease the restrictions. With the rupee already halving the losses seen from May to August, there might not be sufficient justification to keep those measures to place,” said Radhika Rao, economist at DBS in Singapore. “The policy commentary could adopt a move dovish and growth-supportive stance,” she said, referring to the RBI’s policy announcement after its meeting on Friday. 

The partially convertible rupee closed at 61.77/78 per dollar compared to its close of 63.38/39 on Wednesday. The unit rose as high as 61.64, its strongest since August 16. Bonds rallied with the benchmark 10-year yield falling to 8.14 pct, its lowest since Aug 8. It closed at 8.19 percent, down 18 bps. The Sensex and the Nifty closed more than 3 percent up. “It is too early to say that everything is rosy for INR as global factors have played in favor of INR. We have to wait for tomorrow’s policy to take a more concrete view,” said Paresh Nayar, head of fixed income and currencies trading at First Rand Bank in Mumbai

. RBI Governor Raghuram Rajan will detail monetary policy on Friday and is widely expected to keep the policy rate and the cash reserve ratio unchanged, according to a Reuters poll. The poll, which was conducted before the Fed decision, also expects the July cash tightening steps to be retained. A resurgence of inflation to a six-month high in August has muddied waters for the central bank, which has been battling a falling rupee and trying to revive the economy with growth having slumped to a decade low. ( Reuters) Bad-ass Ben Bernanke fuels global rally, India parties hard 

3:45 pm  Economic worries took a back seat as a bull fury seized global markets after US Federal Reserve decided to hold back its tapering plans for a later date. Indian investors joined the party and bought shares as if there was no tomorrow, pushing the benchmark indices nearer record highs. The BSE Sensex today posted its biggest one-day gain since May 2009 after the US Fed shocked markets by refraining from reducing the pace of monthly bond purchases it makes under the quantitative easing programme it introduced a year ago. 

The consensus on Wall Street was that the FOMC would elect to taper its monthly bond buys to $75 billion from the current $85 billion pace. Hence’s Ben Bernanke’s decision to keep stimulus intact at the current pace sent global stocks and gold surging, while interest rates collapsed and the dollar weakened to a seven-month low. In India, the Bank Nifty led the rally with the index gaining more than 3,400 points since its 28 August lows. While the BSE Sensex closed up 663 points at 20625, the Nifty closed 208 points higher at 6107. “In a salute to Fed’s Taper Hold decision, global markets rose sharply.

 There was relief among emerging markets as threat about immediate FII outflows receded. Indian markets also rose on reduced threats of foreign money as well as in anticipation of a favourable policy from the new RBI Governor,” said Dipen Shah, Head- Private Client Group Research, Kotak Securities. But the real question on everyone’s mind is whether the current rally is sustainable. “It’s very tough to say whether this is a start of a structural bull market because tho other legs of a ‘bull market are absent’ given the way India’s economy is posied at the moment. 

Any volatility globally can hurt us even now.. so markets will continue to be volatile,” said Amish Vohra of brokerage Prabhudas Liladher. Technical market analyst too is not buying into the current rally and has advised long-term investors to book profits and exit markets as he expects a correction soon.

 As Firstpost said earlier, Ben Bernanke’s chickening out of taking on the risk of finding out what will happen if he reduces liquidity is an indirect confirmation that liquidity is key. “What does the Fed’s monthly bond purchase of $85 billion do?

 It increases liquidity. And where does the increased liquidity go? Usually into assets – shares, gold, et al.

 This is really the secret of making money on the stock market: look for liquidity surges and ebbs. When it surges, stocks go up. When it declines, markets move down. It is true as much of stocks as onions. The money chasing an asset decides prices in the short run. Long-term fundamentals like demand and supply are important, but the only fundamental that matters in the short run is liquidity,” Firstpost’s R Jagannathan said. 

And it is this liquidity that is driving several brokerages to remain bullish on India. Sanjay Dutt of Quantum Securities sees the market soaring to new high in the immediate short-term, but says breaching 6100-6120 range would be difficult for Nifty. On the downside, 5600-5800 is the concrete base for the market now. The biggest concern, however, is that the rally may fizzle out sooner or later if government fails to act. Now, all eyes are on Raghuram Rajan and what policies he doles out in his first policy meeting on Friday, 20 September to kick start India’s growth process. 

“Combined with the new leadership in RBI as well as in the government, one will probably get to see a new round of growth,” said Raamdeo Agrawal, Joint MD, Motilal Oswal Fin Services in an interview with CNBC-TV18. And while W RBI governor Raghuram Rajan may not be able to go in for big bang rate cuts or easing on the liquidity side, market expects him to ease some of the extreme steps that were taken during the course of July 15 and July 22

. “Because of factors like reduced threat of immediate outflows, the recent appreciation in the rupee, reduced core inflation and continuing low growth, we believe that, the RBI will not increase rates. On the other hand, with the reduced pressure on rupee we expect reversal of some of the measures taken by the RBI over the past 3-4 months to curb the currency depreciation,” added Kotak’s Shah.  

 2:30 pm The Indian markets are continuing there uptrend with the Nifty up more than 1000 points in the last 16 trading sessions and the Bank Nifty trading at a two-month high. The Sensex has also touched a 30 month high and is trading at its highest level since January 2011. According to IIFL, markets will now watch for signs of liquidity easing by the Reserve Bank of India. 

“Unless something unforseen happens, positive sentiment will continue in the market,” said Nirmal Jain of IIFL, adding that markets will now run ahead of fundamentals. He also said that banks will be a favorite for investors and expects buying in these stocks. The Bank Nifty has gained 3400 points since August 28 lows while 30 Nifty stocks have gained over 20 percent since 28 August. Banking stocks have gained in the range of 3 and 23 percent. Among large-cap banks, ICICI bank Ltd gained 6.8 percent while HDFC Bank  is up 4.8 percent. Around 24 BSE stocks hit their 52-week highs as the Sensex gained 700 points at 20666. According to HSBC, 

The fact that the money train will continue for a while means the risk of a hard-landing or a balance of payments crisis has been greatly reduced, if not averted. But, the Fed only postponed its tapering and even the BoJ will not print money forever.

 “To avoid another rough summer, policy-makers in Asia will need to use this brief window to implement structural reforms to put Asian growth on a more sustainable path. That would make for a true bull market,” said the brokerage. Economies with huge balance of payment crisis are likely to get some temporary relief, as inflows are likely to stay for long. India and Indonesia, experiencing the greatest balance of payments pressures of late, should benefit the most, it added. It, however, reiterated that the window will not be open for long, the Fed still thinks it will be done with QE by mid-2014 and tapering has probably been postponed by only three months. Sensex soars on ‘Big Ben’ booster, is it just a one-day glory? 

1:17 pm:  The BSE Sensex surged over 600 points to a 30-month high and the Indian rupee pulled back below 62 per dollar after the U. Federal Reserve stunned markets and decided not to taper its asset-buying programme. At 1;18 pm, the Sensex was up 636 points at 20601, while Nifty was up 204 points at 6104 amid hopes that easy money will continue its way into emerging economies especially India which so far bore the brunt of selling pressure. According to Prashant Jain, Ed & Cio, HDFC Asset Management, the Fed’s delay will give India more time to set right existing imbalances. “”We have to bring down our fiscal deficit and current deficit. You will get more capital when you are strong and capital will not come to you if you are in a weak position. 

Therefore, we need to set right the imbalances and make full use of this small window because ultimately Quantitative Easing (QE) will be withdrawn,” he said in an interview with CNBC-TV18. According to him, if diesel price is increased significantly then fiscal worries will abate to a large extent. “There is good value in this market and that value will unfold whenever we manage to set right these twin deficits,” he elaborated. Some, however, expect the rally to continue. ““I think there is more leg to this rally as the Fed move completely surprised the markets. The key point that the Fed mentioned was regarding unemployment numbers which are above targeted level of 6.5 per cent. This further puts December tapering in question

 Therefore we do believe that this rally will sustain as most fund managers who missed earlier gains will buy in greater chunks now,”  Vinay Khattar, head of research and Vice President at Edelweiss Securities, was quoted as saying by the Business Standard.      Fed move a ‘get-out-of-jail card for markets’, rally won’t sustain 

12:13 pm Fueled by Fed’s decision to continue buying bonds at the current rate of $85 billion a month for now, the market manages to maintain its uptrend. Sensex is still up 531 points or 2.69 percent at 20497 while the Nifty is up 175 points or 3 percent at 6075. However, Sanjeev Prasad of Kotak Institutional Equities believes the current market rally will not sustain over 5 percent as India’s macros continue to be challenging. 

“The market will probably jump 3 percent at the start itself, so I think that trade is done pretty much. After that we will have to wait and see how much of reforms actually take place because once this trade is done one has to get back to the basics once again. It is not as if all of our problems have been solved by whatever announcements made by the Federal Reserves (Fed) last night.

The way I look at it is India has basically got get out of jail card but how we use that card is going to be pretty important going forward. Keep in mind the fact that this tapering is not something which is not going to happen,” he said in an interview with CNBC-TV18. Markets cheer easy money, Sensex hits over 2-1/2 year high 11:03 am BSE Sensex today rose as much as 3 percent to its highest intra-day level in over 2-1/2 years after the US Federal Reserve stunned markets and decided not to taper its asset-buying programme.

 The broader Nifty too is higher by 3 percent after surging as much as 3.3 percent to its highest level since July 23, 2013. The NSE bank index gains 6.9 percent on hopes that the RBI in its policy review on Friday, may ease some of emergency cash tightening steps it had initiated in mid-July. Banks, realty and auto stocks among top gainers today. 

However, the BSE mid-cap index is up only 1.5 percent, as compared to BSE Sensex. Banking stocks are the star performers today; Bankex is up 6.4 percent, while Yes Bank surged over 16 percent However, CNBC-TV18‘s Udayan Mukherjee believes fundamentally nothing has changed, so in the current  scenario the market does not deserve to be trading at an all-time high. 

Meanwhile, the rupee surged as much as 2.8 percent on Thursday,as the US Federal Reserve’s decision not to dial back its easy money policy is expected to provide a reprieve to the Reserve Bank of India (RBI) in its policy making. 

“A delay in the tapering agenda paves the way for the RBI to relook at the liquidity tightening measures put in place in July and possibly ease the restrictions. With the rupee already halving the losses seen from May to August, there might not be sufficient justification to keep those measures to place,” Radhika Rao, economist at DBS in Singapore, was wupted as saying by Reuters.

The rupee and the Indonesian rupiah stand to gain the most if foreign funds return to riskier assets in the wake of the Fed’s surprise decision. Both bore the brunt of the recent sell-off in emerging market currencies since the Fed bank signalled in May that it may begin tapering stimulus this year. Focus on emerging mkts as Sensex inches up 600 points 

10:10 am The BSE sensex surged to 20544, up by 580 points, even as the Nifty hit 6088, up 188 points. With the US 

Federal Reserve lowering economic growth forecast the focus will now shift to emerging markets again and open opportunities for India, Sunil Garg, managing director of JPMorgan Securities said. 

He advises investors to stay long on India. He believes majority of the FOMC outcome has already been factored in the Indian market. Equities, currencies and bonds will rally in the short-term, he told CNBC-TV18.

 Though in the long run, focus will be back on core issues plaguing the country, he warned. Meanwhile, he sees the rupee going below 60 per USD in the near-term. According to him, the RBI may not unwind its tightening measures on September 20 policy meet. 09:32 am Banking stocks are on a roll with the Bank Nifty up 7 percent. Banking stocks have gained in the range of 2 to 7 percent today as the rupee appreciated nearly two percentage points against US dollar after the Federal Reserve decided to continue liquidity infusion through asset purchases. Nifty is slowly inching towards the 6100 level. 

At 9:35 am, the Nifty was up 175  points at 6075 and the Sensex was up 547 points at 20509. Party on Dalal Street as Sensex soars more than 500 points on no taper 9:20 am Looks like a new bull rally is back in the market as Indian equity markets soared in opening trade. While the Sensex opened 540 points higher at 20,559, Nifty opened 183 points higher at 6085. The Bank Nifty too jumped 6.5 percent. All frontline stocks were trading in the green. 

BSE bankex is the top sectoral index with gains of nearly 7 percent. ICICI Bank is up 8.4 percent, Maruti is up 6 percent, SBI gained 5.1 percent. “There is good value in the markets which will unfold once India’s twin deficits are dealt with,” said HDFC Asset Management.

 The Nifty is trading at the highest level since 23 July as the US Federal Reserve has sprung a surprise by saying it would continue buying bonds at an $85 billion monthly pace for now. The markets world over had geared for a reduction in the central bank’s economic stimulus. “The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the US central bank said in a statement. 

So while strains remain in the US economy  emerging markets including India are in no mood to feel any gloom. Market analyst Sudarshan Sukhani believes this is the right time to book profits and get out out of the market. “Do not overstay, book profits,” he said in an interview with CNBC-TV18.

 The Indian rupee was however of the day’s high and was trading at 61.81 against the USD.   Bulls are back as Nifty surges in pre-open, rupee touches 61.7  9:00 am It is a killer start to markets with the Nifty and Sensex surging in pre-opening trade. Even the rupee zoomed past 62 against the US dollar to touch 61.71 after the US Federal Reserve decided not to taper its asset-buying programme.

 The rupee is currently trading at a one-month high as sentiment improves in the market after the US Federal Reserve defied investor expectations  by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth. 

The Indian currency is up 2.7 percent, posting its biggest gain since 16 August. However, CNBC-TV18′s Udayan Mukherjee believes this is only a temporary reprieve for the rupee as the liquidity signal from the US Fed will be tapered after December 2013. 

All eyes will now be on RBI governor Raghuram Rajan who will review the monetary policy tomorrow as it will provide a first glimpse on the new governor’s approach to tackling the country’s growth-inflation dynamics and external vulnerabilities. Sensex, rupee seen zooming as Fed defers stimulus cut 

8:45 AM: Markets are likely to see a gap up opening after the Federal Reserve stunned markets and decided not to taper its asset-buying programme. Markets were braced for a modest cut and the broader consensus was that the Fed would cut the monthly stimulus of $85 billion by $10-15 billion. SGX Nifty futures on the Singapore Stock Exchange was 6114.5, up 3 percent, indicating a gap up opening for Indian shares. 

Nifty witnessed a sharp pull-back on Wednesday in the last half an hour of trade but closed marginally below its crucial psychological level of 5900 on the back of short-covering rally ahead of the US Federal Reserve meet. 

The US Federal Reserve, however, today  defied investor expectations  by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth.

 “I am sure the ‘easy’ money will be used by investors to take a punt on riskier or higher-yield assets, such as the Australian dollar and emerging market stocks,” hedge fund manager Peter Schwartz told Firstpost. According to Credit Suisse, the rupee will gain today. Market analyst Sudarshan Sukhani believes today is a very good day to make profits in the market.

 “We will watch the fun today and take profits on long-term bets, especially the Bank Nifty,” he said in an interview with CNBC-TV18. Brokerage Edelweiss agrees and said today’s rally will provide investors an opportunity to exit the market. After Wednesday’s Fed status quo,  investors would be looking forward to the mid-quarter review of R BI’s monetary policy review on September 20 — the first one under Governor Raghuram Rajan. 

He had postponed the policy review by two days to factor in Fed’s moves. And while the rupee may appreciate on Fed’s decision in the near term, experts say, it would remain under pressure unless policymakers address the wide current account deficit. Overnight, US stocks rallied to record highs after the Fed decided against scaling back a stimulus program that has helped fuel Wall Street’s rally of more than 20 percent this year.

 The stock markets and the rupee are expected to gain on Thursday, after the US Federal Reserve surprised global markets by keeping its bond-buying programme, known as Quantitative Easing (QE) 3, intact. The broader consensus was that the Fed would cut the monthly stimulus of $85 billion by $10-15 billion. Stocks were lower before the announcement, but after the Fed announced it would continue buying bonds at an USD 85 billion monthly pace for now, the Dow and S&P 500 indexes quickly climbed to all-time highs.

 While equities jumped on the Fed’s decision, questions remained how long the rally would last as the central bank expressed concerns about the economy’s future growth with likely budget and debt limit battles in Washington to come.

 MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.9 percent to its highest in almost four months. Australia’s main index gained 1.1 percent to a five-year high and Japan’s Nikkei managed to brush aside a rise in the yen to climb 0.8 percent to a two-month peak. “

The Fed today chose an extremely dovish course of action,” said Michelle Girard, a senior U.S. economist at RBS. “It did not just postpone tapering for three months – today’s developments open the door for a longer-lasting QE3 programme.” With inputs from Reuters