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Fed rate cuts may empower other economies

Financial regulators of Asian nations may be mirror the recent Fed cuts, and overseas investors are anticipating possible gains. In India, for example, there is speculation that the Fed cut could inspire a similar move locally:
The Reserve Bank of India's quarterly monetary policy review, due on Oct. 31, is more than a month away, but speculation that a dovish policy could be in the offing is already getting louder in the local stock markets after the U.S. Federal Reserve's rate move last week. And investors in interest rate-sensitive stocks, such as financials and automobiles, could expect increased level of volatility this week.
As in the U.S., investor sentiment is mixed, leading to volatile, whippy market moves:
Opinion on the street is divided. But what is funny is that while some are betting the central bank may cut the statutory liquidity ratio -- the percentage of deposits that banks need to keep as cash, gold or invested in government bonds -- others are simultaneously speculating on a hike in banks' reserve requirement. Emboldened by the Fed rate cut, speculators are clearly focusing only on factors favoring a lenient monetary policy stance, such as industrial output, growth of which fell to single-digits in July for the first time in several months. Or exports, which are on a downtrend as exporters' competitive edge is blunted by a strong rupee. And then data released Friday showed that inflation continued to roll toward the 3.25% mark, way below the RBI's target of 5%.
We have certainly seen mixed sentiment this week, with a largely flat market dominating much of the time, and headlines alternating between announcing decline and rallies as if these were true and permanent features of the market map. Guaranteed that even a lenient monetary policy stance is likely to induce mixed reactions, particularly in the short run, and it will take time for investors to determine whether such moves are truly bullish or bearish for the overall economy.
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Michael H. Cohen is Principal in Law Offices of Michael H. Cohen and also President of a nonprofit organization exploring legal, regulatory, ethical, and health policy issues in the judicious integration of complementary and alternative medical therapies (such as acupuncture and traditional oriental medicine, chiropractic, naturopathic medicine, homeopathy, massage therapy, energy healing, and herbal medicine) and conventional clinical care. Michael H. Cohen is author of books on health care law, regulation, ethics and policy dealing with complementary, alternative and integrative medicine, including Healing at the Borderland of Medicine and Religion, Complementary and Alternative Medicine: Legal Boundaries and Regulatory Perspectives (1998), Beyond Complementary Medicine: Legal and Ethical Perspectives on Health Care and Human Evolution (2000), and Future Medicine: Ethical Dilemmas, Regulatory Challenges, and Therapeutic Pathways to Health Care and Healing in Human Transformation (2003).
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