The US Federal Reserve decreased its benchmark interest rate by 25 basis points to 3.75%–4.00% on Wednesday, the second time this year. For the second time this year, the US Federal Reserve decreased its benchmark interest rate by 25 basis points on Wednesday, bringing it down to 3.75%–4.00%. According to the central bank, threats to the US economy, changing data, and the forecast for the economy will all influence future rate changes.
Powell Warns Against Expectations of a December Cut
Fed Chair Jerome Powell expressed caution despite the reduction. He emphasized that the situation is “far from it” and stated that expectations of another rate cut in December 2025 are not a “foregone conclusion.” There is currently a 68% chance that markets will reduce another 25 basis points in December.
Market Reaction Globally
Following the policy announcement, US markets ended the day with mixed results: the Nasdaq gained on tech strength, while the Dow Jones and S&P 500 declined. Powell’s tone dimmed chances for near-term easing, and Asian markets began largely down on Thursday.
Short-Term Moves Already Priced in and Their Effect on Indian Markets
The Fed’s decision today is anticipated to have an impact on the Indian market. Analysts point out that the recent rise mostly accounted for the 25 basis point reduction. However, loosening US monetary policy can encourage foreign investment in developing nations like India.
“In the long run, the rate reduction will be net favorable. According to Avinash Gorakshakar, “lower US yields make American bonds less appealing, and some FII money will come to India.” However, he does not anticipate a significant increase based only on this information.
A decrease in US Treasury rates can lower borrowing costs globally and promote “risk-on” flows to developing markets, according to Prashanth Tapse of Mehta Equities.
A cautious tone might increase volatility.
Powell hinted at differing Fed opinions and downplayed December reduction predictions, which caused US equities and Treasuries to decline and rates to slightly increase.
The position is favorable for growth assets but “unlikely to spark a risk-on rally” unless labor and inflation indicators improve, according to Ross Maxwell of VT Markets.
Technical Perspective on Nifty
On the daily chart, the Nifty 50 index created a small-bodied candle with a slight upper shadow, indicating the emergence of weak selling pressure near this important resistance zone. The index is trading comfortably above its important moving averages.
Over the past three sessions, the RSI has progressively increased from 67.92 to 72.43, indicating that purchasing vigor is still strong. Sudeep Shah, Head of Technical Research and Derivatives at SBI Securities, stated, “In the meantime, the ADX keeps rising, indicating that the broader trend is strong, which supports the case for further upside if Nifty 50 manages to break above immediate resistance levels.”
He claims that the 26,100–26,150 range will serve as immediate resistance for the Nifty 50. If the index is able to make a follow-through move above the 26,150 level, the rally may extend to the 26,350 level. The range of 25,850 to 25,800 will provide as vital support for the Nifty 50 index on the downside, he continued.
Disclaimer: Neither the website nor its administration endorse the opinions and financial advice provided by the experts in this Business Connect article. Before making any financial decisions, users are urged to consult with qualified specialists.
FAQs on the US Fed Rate Cut and Its Impact on Indian Markets
1. What did the US Federal Reserve announce recently?
The US Federal Reserve reduced its benchmark interest rate by 25 basis points to a range of 3.75%–4.00%. This marks the second rate cut in 2025, signaling a cautious shift in monetary policy amid global economic uncertainties.
2. Why did the Federal Reserve decide to cut rates?
The rate cut was influenced by slowing economic data, inflation trends, and the need to support economic stability. The Fed stated that future decisions will depend on the outlook for inflation, employment, and financial market conditions.
3. What did Fed Chair Jerome Powell say about future rate cuts?
Fed Chair Jerome Powell warned against assuming another rate cut in December 2025, emphasizing that such expectations are “not a foregone conclusion.” He highlighted that the central bank remains data-dependent and will evaluate conditions before taking further action.
4. How did the global markets react to the Fed’s decision?
Following the announcement:
The Nasdaq gained due to strong tech sector performance.
The Dow Jones and S&P 500 indices ended lower.
Asian markets, including India, opened mixed to slightly lower on Thursday as Powell’s cautious tone reduced near-term optimism.
5. How does a US Fed rate cut affect Indian markets?
A Fed rate cut typically leads to lower US bond yields, which can make emerging markets like India more attractive for foreign investors. It may also:
Encourage Foreign Institutional Investment (FII) inflows.
Support rupee stability in the medium term.
Lower global borrowing costs, benefiting Indian corporates and banks.
6. Will the rate cut immediately boost Indian stocks?
Experts believe that the short-term impact is already priced in.
According to Avinash Gorakshakar, the move is positive in the long run, but may not trigger a sharp rally right away. Investors should expect moderate gains and increased volatility rather than a major surge.
7. How might this move influence foreign investment in India?
A lower US interest rate environment can drive FII inflows into India, as investors seek higher returns in developing markets. This can boost liquidity, equity performance, and bond demand domestically.
8. What is the technical outlook for the Nifty 50 after the Fed rate cut?
According to Sudeep Shah of SBI Securities, the Nifty 50 remains in a strong uptrend, with:
Immediate resistance: 26,100–26,150
Next target: 26,350 if it breaks above resistance
Support levels: 25,850–25,800
The RSI and ADX indicators suggest continued buying strength and positive momentum in the near term.
9. Could volatility increase after the Fed’s cautious tone?
Yes. Powell’s remarks suggesting uncertainty about future cuts may lead to market volatility. Investors could see short-term fluctuations in equities, bonds, and currency markets until more clarity emerges on inflation and labor data.
10. What should Indian investors keep in mind now?
Investors are advised to:
Avoid short-term speculation on Fed policy expectations.
Focus on domestic fundamentals and earnings growth.
Diversify portfolios across equities, bonds, and gold to hedge against global uncertainties.
Always consult with a financial advisor before making major investment decisions.
