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Below the Comment Fed Policy Reaction June 2026 by Naval Kagalwala, COO & Head of Products, Shriram Wealth Ltd

“In the first meeting under the new Fed Chair Kevin Warsh, for the fourth consecutive Fed meeting and in line with market expectations, the Fed decided to keep the interest rates unchanged at 3.50% - 3.75%. However, the commentary underscored a cautious approach, highlighting persistent inflation risks (Total Personal Consumption Expenditure {PCE} Inflation index was revised to 3.6% for this year, sharply higher from the 2.7% estimated in the March meeting) and a lower GDP growth (projected at 2.2% vs 2.4% in March) stemming from the geopolitical headwinds. With more than 50% of the dot plot projections indicating at least one rate hike this year, Interest rates could remain elevated longer than previously anticipated.

For India & Indian investors - a higher US yield reduces the appeal for Indian debt for global investors and also puts pressure on the INR. Closer home, a below normal monsoon forecast by IMD (90% of long-period average with a 60% chance of drought like conditions) is likely to impact agriculture and hence a higher food inflation. These risks are currently offset with the oil price below US$80 based on expectations of stability in the US-Iran conflict.”

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