Fed Rate Cut: What does the US Fed rate cut mean for the Indian stocks as Powell hints at more easing ahead?

Fed Rate Cut: For the first time in 2025, good news has been heard from the US. The US Central Bank has cut policy interest rates by 25 basis points after 9 months. This has brought the US Central Bank's interest rate range to 4% to 4.25%. The last policy rate cut was in December 2024, when the Fed cut rates by 25 basis points. In 2024, the Fed had cut rates by 1%. Following this decision, the US stock market experienced mixed results. Meanwhile, gold prices in foreign markets declined.

Let us tell you what kind of announcement the Fed has made regarding the rate cut.

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Fed has been under constant pressure to cut interest rates

The dollar index is declining. The Federal Reserve has been under pressure to cut interest rates for quite some time. On one hand, US President Donald Trump was pressuring the Fed, while on the other, the public was demanding cheaper loans. However, after Trump's tariff program, inflation in the US was predicted to rise. However, inflation data from the US has not yet shown any significant concern, leading the Fed to cut interest rates by 25 basis points.

After 9 months, the US Fed has made loans cheaper

The biggest question now is what impact this will have on India. Will the Indian stock market rise? Will the Indian rupee find support? Will there be any positive changes in gold and silver prices in the Indian futures market? Finally, the most important question is whether interest rates will be cut at the two RBI MPC meetings this year. Let's try to understand this.

There will be two more rate cuts

The Chairman of the US Central Bank indicated that interest rates could be cut two more times this year. This means that the Fed could cut rates by 25 basis points each, for a total of 50 basis points, at its policy meetings in November and December. At the Fed meeting, Governor Miron Decent, a member, recommended a 50 basis point cut this time. However, the majority vote was for 25 basis points. Consequently, the decision was made to cut interest rates by 0.25 percent. According to the Fed's indications, a 75 basis point cut could be made this year.

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Fourth rate cut in a year

In fact, the US Central Bank has cut rates four times in the past year. The first was a 50 basis point cut on September 18, 2024. This was followed by 25 basis point cuts each in November and December. This means that the Fed cut interest rates by 1% for three consecutive months.

After that, after a nine-month break, it has now cut interest rates again. This means it has cut interest rates by 1.25% in one year. If the Fed cuts another 50 basis points by December, the policy rate range will be 3.50% to 3.75%. According to the Fed's indications, there will be only one rate cut in 2026 and 2027.

Will there be an impact in India?

As we have seen, even after the US Federal Reserve cut interest rates by 0.25%, there was no positive sentiment in the stock market, gold prices, or currency markets. Therefore, it can be expected that the Indian stock market will also not see the same effect. Experts believe that the market was expecting a 0.35 to 0.50% rate cut from the Fed, but that did not happen. The market had already digested the 0.25% rate cut. Consequently, the stock market reacted negatively to the smaller reduction. Experts also say that if the Fed had announced a 75 to 100 basis point rate cut at two more meetings this year, the stock market could have seen a rally. Furthermore, the Fed has only announced two rate cuts in the next two years.

Will there be an interest rate cut in India?

The biggest question now is whether or not India will cut interest rates following the Fed's decision. However, over the past year and a half, both the Fed and the RBI have appeared to be on opposite sides. When the US Fed began rate cuts in September, it was expected that the RBI would also announce a rate cut, but that did not happen.

Summary

In 2025, after the US halted its rate cuts by 1%, the RBI chief was replaced. Following Shaktikanta Das's retirement, Sanjay Malhotra took over and implemented a 25-basis point cut in the February-April policy meetings, followed by a 50-basis point cut in June. The RBI kept the policy rate unchanged in the August meeting. However, it is expected that the RBI may cut the rate by 25 basis points in the October and December policy meetings.