In a preview of what an overly hawkish FOMC statement today could do to markets, overnight India’s central bank hiked its key policy rate in a surprise move, the first hike since June 2018, leading to a broad-based selloff in bonds as the fight against inflation becomes real, with the Federal Reserve also expected to hike rates by 50 bps when it meets later today.
The Reserve Bank of India unexpectedly raised the policy repo rate - its main lending rate - by 40 bps to 4.40% highlighting continuing inflation risks amidst a broad-based growth recovery even as it decided to "remain accommodative while focusing on withdrawal of accommodation".
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