The US Federal Reserve has lowered its benchmark interest rate by 25 basis points (bps), bringing the federal funds rate to a range of 4.00%–4.25%. The move, backed by an 11-1 vote in the Federal Open Market Committee (FOMC), also signaled the possibility of two more rate cuts before the end of the year.
The Fed’s decision reflects concerns over a slowing U.S. labor market, even as inflationary pressures persist. Officials acknowledged that while economic growth remains steady, hiring trends have weakened, prompting a need for accommodative measures to sustain momentum.
According to the central bank’s updated projections, inflation is expected to remain above target for longer than previously anticipated. Policymakers now estimate that the Fed’s 2% inflation goal may not be achieved until 2028, underscoring the prolonged challenges in taming price pressures.
Impact on Indian Markets
Global monetary policy shifts, especially from the Federal Reserve, have a significant influence on emerging markets like India. A rate cut typically weakens the dollar and can attract foreign capital flows into riskier assets, including Indian equities. However, persistent inflation concerns and uncertainty about future Fed actions may inject volatility into Indian stock markets in the near term.
Analysts suggest that sectors sensitive to foreign institutional flows, such as banking, IT, and capital goods, could see immediate reactions, while bond markets may also experience shifts in yield trends.
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