US Fed meeting 2025: The US Federal Reserve, on Wednesday, announced a 25 bps rate cut in its benchmark interest rate to a range of 4–4.25 per cent. The decision marks the beginning of a monetary easing cycle designed to support a slowing labour market, despite persistent inflation.
The Fed noted that future policy moves will hinge on economic data, the broader outlook, and risk assessments. It also highlighted that growth weakened in the first half of the year and job creation has cooled, though inflationary pressures remain elevated.
Looking forward, policymakers signalled the likelihood of two additional rate cuts this year, totalling 50 basis points, followed by one cut in 2026 and another in 2027.
“The FOMC cut the benchmark interest rate by 25 bps as widely anticipated. The policy statement emphasised a shift in labour market conditions, noting slower job gains, an uptick in the unemployment rate, and increased downside risks to employment, in contrast to “solid labour market conditions” in the July policy meeting. Importantly, the Fed dot plot indicated two more rate cuts in the ongoing calendar year, taking the median policy rate for 2025 to 3.6% (vs. 3.9% as per the June meeting), and for 2026 to 3.4% (vs. 3.6% previously),” said Naval Kagalwala, COO & Head of Products at Shriram Wealth.
Global stock markets were mixed following the US Fed’s decision, while commodities such as gold and crude oil recorded a sharp decline following the announcement.
Meanwhile, the US Dollar rebounded on Thursday after the US Fed rate cut announcement, even though a rate cut tends to pressurise the greenback.
Fed rate cut → Dollar weakens → EM currencies gain strength → Rupee gains strength, explained experts.
Amit Pabari, MD, CR Forex Advisors, said the 25-bps cut, though expected, has already stirred momentum in global currency markets. For USD/INR, a softer dollar index sets the stage for the rupee to reclaim ground, as investors factor in a recalibration of U.S. monetary policy, he said.
“The Fed also hinted at further easing, projecting two more cuts totalling 50 bps by the end of 2025 and an additional trim in 2026 — a slightly deeper path than previously signalled. This reinforces the case for sustained dollar weakness,” according to Pabrai.
With a softer dollar coinciding with improving fundamentals at home, the rupee appears better positioned to weather volatility and perhaps enter a phase of renewed stability, he added.
How US Fed rate cut impact the bond market?
When interest rates decline, existing fixed-rate bonds gain appeal since new bonds are issued at lower rates. This heightened demand pushes up the prices of current bonds and drives their yields lower. Such bonds are especially sensitive to rate movements.
According to Anuj Gupta, Director, Ya Wealth Research & Advisory, when the Federal Reserve reduces rates, yields on US Treasury fall and their prices climb—for instance, the 10-year Treasury yield briefly dipped below 4% following the latest Fed cut.
“In general, rate cuts are seen as positive for equities, as reduced borrowing costs can enhance corporate earnings, spur investments, and support overall economic growth,” Gupta said.
Experts also believe that the US Fed rate cut has paved the way for the Reserve Bank of India (RBI) in India to move to cut rates, given the slowdown in credit uptake and to spur growth in the economy.
“Another reason for an RBI rate cut is the slow transmission of rate cuts so far in the banking system. This is due to the steep government bond yield curve as banks tend to borrow in the short term and lend for longer tenors for growth sectors,” said Vishal Goenka, Co-Founder of IndiaBonds.com.
Should you invest in bonds after US Fed rate cut?
According to market experts, Fed rate cuts prompt investors to move funds away from safe assets like U.S. Treasuries and bank deposits toward riskier options such as equities, private equity, venture capital, and emerging markets.
“As a result, India should expect stronger capital inflows—particularly in Q4, when large global asset managers finalise allocations. This comes at a time when the Indian economy is demonstrating resilience, even in the face of headwinds such as the Trump administration’s imposition of a 50% tariff on Indian exports. Overall, India stands to benefit from a “double engine” of global liquidity easing and strong domestic fundamentals,” said Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund.
Naval Kagalwala of Shriram Wealth Ltd further said that the focus now shifts to the H2 supply distribution and the RBI MPC Oct policy meeting, from a bond market prospective.
“We expect the RBI MPC to stay put on rates in the upcoming meeting, though revisions in CPI projections (following GST rate rationalisation) and tweaks to underlying assumptions will be closely watched, given the sharp depreciation in INR and ongoing geopolitical uncertainty,” Kagalwala said.
Meanwhile, Vishal Goenka of IndiaBonds.com said that its a good time to invest in bonds amid expectation of further rate cuts this financial year.
“Addressing the steep curve by interest rate cuts and balancing of government securities issuance for short periods maturities could get the desired effect of lowering borrowing costs for companies and economy in general,” Goenka said.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
