"The government is of the view that the markets had already factored in the US Federal Reserve’s decisions and therefore is not likely to be surprised by these moderate changes," he said in a statement.

Chidambaram, who spoke to Reserve Bank of India (RBI) Governor Raghuram Rajan on Thursday morning about the impact of US tapering, said: “We are better prepared than in May 2013 to deal with consequences, if any, of the US Federal Reserve’s decisions.”

The BSE Sensex plunged by about 190 points in the early trade, while the rupee weakened to 62.44 to a dollar following the US Fed announcement to reduce the quantum of bond purchases.

The US Federal Reserve last night announced that it would reduce the monthly bond purchases to USD 75 billion from the existing level of USD 85 billion from January.

"This is a mild reduction and the US Federal Reserve has not announced any sequential reduction" Chidambaram said.

“The US Federal Reserve will continue its purchases of treasury and agency mortgaged-backed securities and employ its other policy tools as appropriate, until the outlook for the labour market has improved substantially in the context of price stability,” he added.

The US Federal Reserve had in May announced that it will taper bond purchases, sending the markets world over in a tizzy. However, it postponed the decision later.


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