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

“In line with market expectations, the FOMC cut its benchmark rates by 25 bps to 3.50% - 3.75%. The dot plot was maintained as in Sep 2025 meeting, inflation revised lower and real GDP was seen stronger than before. The overall tone of the policy was doveish with members noting increasing downside risks to employment - leading to a steepening of the rate curve. Language on growth was upbeat as seen in an upward revision in real GDP forecasts - given strong consumer spending, and business investments in AI holding up well. For India, lower US interest rates could help FII inflows, over the next few quarters as corporate profitability and valuations improve. Chair Powell noted that the committee would carefully evaluate incoming data, with policy rates within its large estimates of neutral value. The markets will keep watching data on US inflation, jobs, growth and the guidance from Fed, especially since there was a divergence in voting pattern.”

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