The US Federal Reserve kept interest rates steady in the range of 3.5-3.75%, for the first time since July 2025, a sharp pivot from the recent trend that has seen the Fed lower the benchmark rates three times in a row. The decision comes at a time of growing tension between the US Federal Government and the US Fed, with President Donald Trump openly looking to replace Fed Chair Jerome Powell.
In the official commentary, the US Fed noted that while the growth continues to expand at a ‘solid pace’, the inflation remains at ‘elevated levels’, prompting a ‘wait and see’ approach after the recent flurry of rate cuts.
What Does It Mean For Indian Markets?
Needless to say, Indian markets will be a key focus area as market participants closely monitor the spillover effect of the US Fed rate action on emerging economies.
An early indicator is usually the GIFT Nifty, which is trading with cuts of around 0.14% early morning. GIFT Nifty trading flat with a slight negative bias suggests the markets could be set for a flat open on Thursday.
Asian markets, though, indicate a broader pressure, with the KOSPI, ASX 200 and the Hang Seng index trading with sharp cuts of up to 0.70%.
Typically, a rate cut in the US translates to cheaper global liquidity, a weaker dollar, and foreign investors scouring emerging markets for yield.
However, with the Fed standing still, the anticipated short-term impetus for Indian markets may be delayed. The US dollar, which has been trading with a lot of weakness lately, may find some momentary stability. This could act as a headwind for the rupee, which remains near record lows.
While all of this usually means a temporary cap on rallies in precious metals, worries over the US Fed’s independence appear to have created a ‘debasement trade’, which spurred gold prices above the $5,500 per ounce mark.
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