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Economy round-up: Fed holds rates; GST council to meet for first time

22 September, 2016

The US Federal Reserve kept interest rates unchanged on Wednesday but hinted at tightening monetary policy by the end of this year. If this happens, it could hurt Indian markets, which have benefitted from low interest rates, and may drag down share prices and the rupee.

Fed chair Janet Yellen said a rate hike would be required to prevent the economy from overheating. The Fed had raised rates in December for the first time in nearly a decade.

Meanwhile, the newly formed Goods and Services (GST) council is set to meet on Thursday for the first time. The council is chaired by the union finance minister and comprises finance ministers of all the states. It will decide on the likely GST rates and deliberate on other key aspects of the new indirect tax regime.

Separately, Business Standard reported that states want an empowered committee of their finance ministers, in addition to the GST council. This, they believe, will help build consensus among themselves before key issues are taken up by the council. The states have been demanding dual control over tax assesses, which the Centre has been resisting.

In another development, India’s current account deficit (CAD) has shrunk sharply owing to a decrease in its trade deficit. The country’s CAD narrowed to $0.3 billion for the quarter through June from $6.1 billion in the previous quarter. Other than a decline in exports, the CAD has also been lowered by cheaper oil imports that have led to a fall in its import bill.

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Economy round-up: Fed holds rates; GST council to meet for first time

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