1. Did the Federal Reserve cut rates recently?
Yes, the US Federal Reserve reduced its policy interest rate by 25 basis points, bringing the federal funds rate to a range of 4.00 %–4.25 %, marking the first cut since December 2024.
2. How does a Fed rate cut impact the Indian economy?
A Fed rate cut makes US assets less attractive, leading to more capital inflows into India. It also lowers global borrowing costs, influences the rupee’s movement, and creates room for the RBI to ease its policy rates.
3. What effect does the Fed rate cut have on the Indian stock market?
Indian equity markets gained after the Fed’s decision. Sensex jumped more than 300 points and Nifty-50 crossed 25,400, with IT stocks benefiting the most due to their strong US business exposure.
4. Will the RBI cut rates after the Fed’s move?
The RBI has already reduced the repo rate by 100 basis points since February 2025. With inflation forecasts revised lower to about 2.4 % for FY26, the RBI is expected to cut rates again in October 2025 if conditions remain favorable.
5. What risks does India face from the Fed’s rate cut?
The biggest risks are imported inflation from a weaker rupee, volatility in currency markets, and sudden capital outflows if global investors change sentiment. Rising oil prices or higher fiscal deficits could also offset the benefits.
