Quote on The US Fed Rate Meeting by Mr. Arsh Mogre, Economist Institutional Equities, PL Capital - Prabhudas Lilladher
Below the Quote onThe US Fed Rate Meeting by Mr. Arsh Mogre, Economist Institutional Equities, PL Capital - Prabhudas Lilladher
“The March FOMC decision was defined less by its hold on rates and more by deepening uncertainties clouding the US growth-inflation trajectory, notably underscored by forecasts of slower growth at 1.7% (down from 2.1%) and elevated inflation expectations at 2.7% for 2025. The Fed's cautious stance—pausing at 4.25-4.50% and signaling two potential 25 bps cuts later this year—reflects heightened concerns over trade tensions amplified by Trump 2.0's aggressive tariff policies, which threaten stagflationary pressures reminiscent of early trade-war episodes. With nearly unanimous uncertainty among Fed members regarding future projections, monetary policy finds itself secondary to fiscal policy-driven volatility. For emerging markets like India, this Fed uncertainty has mixed implications. Short-term relief, seen through declining U.S. yields (2-year Treasury dipping below 4%), is aiding near-term INR strength, currently rallying over 1% to around 86.34-86.36/USD. Yet, prolonged volatility, coupled with anemic U.S. demand (Q1 GDP nowcast at -2.1%), poses structural risks to export-oriented sectors. However, India's inherent resilience, underpinned by uptick in consumption trends (PFCE growth at 7.6%) and inflation moderating to a seven-month low of 3.6% in February, offers a critical buffer. Proactive liquidity management by the RBI, via interventions like open-market operations and forex swaps, remains vital in stabilizing macro-financial conditions. Ultimately, India's ability to navigate this global uncertainty hinges on sustaining domestic growth momentum and prudent monetary maneuvering amidst external turbulence.”
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