US Fed signals caution before rate cuts
New Delhi
The US Federal Reserve is expected to hold off on cutting interest rates until it sees clear signs of economic weakness, experts said after the Fed kept its key rate steady at 4.25–4.5%.
Economists say this move makes sense given global uncertainties, including ongoing geopolitical tensions and the US government’s temporary 90-day pause on new tariffs. The US economy is still growing, and joblessness remains low.
Hemant Jain of PHDCCI said the Fed's decision supports job growth while aiming to bring inflation down to its 2% target. While inflation is under control for now, concerns remain over how tariffs could raise prices for consumers. Fed Chair Jerome Powell noted, “The cost of the tariff has to be paid,” hinting that some price pressure will affect shoppers.
However, Powell added that the economy still looks strong, so the Fed has time to wait before taking any action. Analysts at Emkay Global said the Fed is likely to wait for signs of a weaker job market before cutting rates — possibly in September. Market data shows a 63% chance of a cut in September, but only 10% for July.
The Fed has lowered its 2025 growth forecast to 1.4% and expects inflation to rise to 3.1%, suggesting tough times ahead. Short-term Treasury yields reacted to the news, while US stock markets remained flat.
Experts believe a 50-basis-point cut in 2025 could help boost global liquidity and benefit markets like India, though risks from the Middle East and trade policies could limit gains. The Fed is expected to stay flexible as new data emerges.