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Below the Comment on FOMC keeping rate unchanged Ajay Garg, CEO, SMC Global Securities Ltd  

FOMC has decided to keep the federal funds rate unchanged in the range of 4.25% to 4.5% due to the risk of inflation from tariff policies. The inflation target for 2025 has been revised upward to 2.7% from the last estimate of 2.5%. Fed has also lowered its economic growth forecast to 1.7% for 2025, from the last estimate of 2.1%. This reflects concerns about slowing consumer spending and rising economic uncertainties. Though the Fed has also highlighted the rate cut of 50 basis points this year to boost the economic growth.

The mix of higher inflation and lower GDP growth forecast in the US will likely benefit the emerging markets from capital inflows. With the expectation of a Fed rate cut in the near term, India stands to benefit from rupee appreciation as investors will move their investments to high-yield economies. Amidst the growing uncertainty at the global level, India is still experiencing stable GDP growth and lowering inflation. This will also help RBI to consider further rate cuts in 2025 which will increase consumer spending, boost borrowing activities, and improve liquidity in the market. Overall, India’s economic growth is seen as strong enough to absorb tariff-led inflation and geopolitical worries.

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