Following its two-day policy meeting, the US Federal Reserve’s Federal Open Market Committee (FOMC) decided to leave its key interest rate unchanged at 3.50%–3.75%, according to an official statement issued on Wednesday, January 28, 2026.
The decision to hold the US Fed rates steady comes after the American central bank delivered three consecutive rate cuts. The Fed began reducing benchmark interest rates in September 2025 and has lowered rates by a cumulative 75 basis points during the year, after keeping them unchanged since December 2024.
“In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 per cent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the FOMC statement read.
According to experts, the Federal FOMC’s decision to keep rates unchanged has important implications for global monetary policy, including India.
How Fed’s stance impact the RBI’s decision?
Seema Srivastava, Senior Research Analyst at SMC Global Securities, believes that the US Fed’s stance reduces pressure on emerging markets like India to cut rates aggressively, since a widening interest rate differential could trigger capital outflows and weaken the rupee.
According to Srivasatava, RBI is expected to prioritize stability, allowing time to assess the impact of past cuts and the transmission of lower rates into the economy.
“While India’s GDP growth remains resilient at 6.5–7% for FY26, food inflation risks and fiscal expansion from Budget 2026 weigh heavily on the RBI’s decision-making. Cutting rates further could support domestic credit growth and consumption, but it would also risk currency depreciation and financial instability if global investors perceive India’s monetary stance as too loose compared to the U.S,” she explained.
RBI to cut rate in February 2026?
The market expert also anticipates the RBI is unlikely to announce another rate cut in the upcoming February meeting.
“ For the Reserve Bank of India (RBI), which has already lowered the repo rate by 125 basis points since February 2025 to 5.25%, the Fed’s pause makes it less likely that the RBI will announce another cut in its upcoming February policy meeting,” Srivastava said.
It is anticipated that the RBI is likely to hold the repo rate steady in February, aligning with the Fed’s cautious approach and focusing on rupee stability, inflation management, and fiscal credibility, she added.
However, global brokerage firm BofA Securities anticipates the Indian central bank will ease rates by 25bps at the MPC in February, to 5.25%.
“In our view, given the persistent uncertainty on the growth outlook, the RBI will likely ease again, utilising the current policy space, and cut rates by 25bp in February MPC to 5.25%, coupled with significant liquidity injections, with a slightly longer-term assurance on liquidity,” the firm said in a note.
The brokerage firm believes that if the RBI decides to cut rates in February, it would be the last cut in the cycle; however, if it does not, the RBI may continue to give dovish guidance to keep its options open.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
