Fed's rate cut disappoints markets, sticky inflation adds to global woes

FOMC projections, dollar surge, and policy uncertainties pressure emerging markets

Adjusting to changing policy realities is often difficult for financial markets. On Wednesday, the Federal Open Market Committee (FOMC) of the United States (US) Federal Reserve reduced the target range for the federal funds rate by 25 basis points, as was widely expected by financial markets. However, both the stock and bond markets sold off. The S&P 500 dropped about 3 per cent, while the yield on 10-year US government bonds increased by about 13 basis points to top 4.5 per cent, the highest level in several months. Bond prices and yields are inversely related. The benchmark BSE Sensex in