Perspective on US FOMC Announcement by Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund
Below the Perspective on US FOMC Announcement by Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund
From September to December 2024, the U.S. Federal Reserve cut the federal funds rate by 100 bps. Likewise, from September to December 2025, the Fed reduced short-term rates by a further 75 bps, including today’s 25 bps cut. With this move, the federal funds rate now stands at 3.625%—very close to the estimated policy-neutral rate of 3.25%.
Looking ahead, the Fed’s dot plot indicates just one additional rate cut in 2026 and one more in 2027, though the timing is uncertain. Much will depend on whether inflation can ease from 3.0% toward the 2.0% target and whether job growth avoids further deterioration. Adding to the uncertainty is the transition to a new Fed Chair in May 2026. Reflecting these factors, the 10-year U.S. Treasury yield has risen in the last month from 4.00% to 4.16%. Higher long-term rates and unclear policy expectations have weighed on asset valuations and heightened volatility across rate-sensitive sectors.
All this policy uncertainty is negative for emerging markets. Regarding India, the impact is a bit worse as the India–U.S. trade deal has also not been finalized. These developments are putting additional downward pressure on the rupee–dollar exchange rate. As a result, we expect FII inflows into India to remain under pressure, which could further weigh on equity valuations and influence debt markets. In contrast, gold prices in India are likely to remain supported in this environment. While India’s strong long-term growth outlook remains intact, the near-term macroeconomic backdrop will likely be dominated by these global headwinds.
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