US Fed Rate Cut Guaranteed? 'Tricky Call', Says Ross Maxwell; Eyes Impact On Indian Market

The US Federal Reserve is set to announce its interest rate and monetary policy decision on Wednesday, Dec. 10, after a two-day Federal Open Market Committee (FOMC) meeting. Fed chairman Jerome Powell-led rate-setting panel has cut the federal funds rate by a quarter-point twice this year to 3.75%-4.00%.

However, FOMC policymakers are now divided-than-ever over the ninth and final policy verdict for 2025. The recently-concluded US government shutdown has triggered the delay of key economic data which is otherwise vital to the Fed's policy decisions. This comes as the US economy navigates its labour market pressures and stalled growth on trade and tariff woes.

Ahead of the US Fed's policy verdict, Ross Maxwell, Global Strategy Operations Lead, VT Markets said in interview with NDTV Profit's Nikita Prasad that the upcoming decision is 'harder to predict' than ever before.

The expert believes that the verdict is a 'tricky call' as the 'conflicting' economic data is not enough to guarantee a rate cut. Wall Street has already priced in a rate cut, which makes markets sensitive to any 'policy misstep'. Maxwell also eyes that easing the policy stance may be positive for Indian markets, depending upon other supportive indicators.

1. The US Federal Reserve's 12-member committee is divided than ever over whether to cut interest rates in the upcoming December policy meeting. Some analysts believe the Fed is 'flying blind' into its final meeting of the year. Why is this Fed policy verdict becoming so hard to predict?

The Fed policy decision has become hard to predict because of mixed messages being sent by key signals that traditionally guide rate decisions. Inflation has eased from its peak but remains sticky in certain sectors such as housing and services, making some members cautious about cutting rates.

Growth indicators such as consumer spending, easing job gains, and manufacturing data are suggesting that policy tightening risks slowing the economy. The Fed’s usual forecasting tools have become less reliable in the post-pandemic era, where economic behaviour no longer follows pre-2020 patterns.

FOMC must interpret conflicting data without a clear historical model to lean on. The financial markets have already priced in potential rate cuts, tightening financial conditions, making markets more sensitive to any misstep.

The FOMC reflects these uncertainties, with some members prioritising inflation control and others emphasising growth risks. So, the December’s verdict is unusually unpredictable, because the economy itself is sending signals that are harder than ever to read with confidence.

2. The US government shutdown triggered the delay of key economic data which is otherwise vital to the Fed's monetary policy decisions. How has this complicated things further for Fed chair Jerome Powell at a time of deeply split positions within the FOMC?

The US government shutdown, which delayed the release of crucial economic data, has made an already challenging policy environment more complex for Jerome Powell, at a time when the FOMC is already divided.

The Fed relies on data such as employment, inflation, consumer spending data, to assess the strength of the economy. With these reports postponed during the shutdown, Powell is forced to lead discussions and guide decisions with an incomplete picture of the economic conditions.

This is especially problematic when FOMC members are split between those who fear inflation could reaccelerate and those who worry that a tight policy could stall growth. Without fresh data, the gap between those who fear inflation versus those worried about growth is more likely to widen.

Without clear, up-to-date and relevant numbers, there is also an increase in the risk of policy missteps. This makes achievement of a consensus significantly harder and heightens the pressure to balance caution when uncertainty is already high.

3.The US Fed's dual mandate from Congress is to keep inflation low and employment high. Do you think these readings are heading in the right direction for the FOMC to deliver a rate cut on Dec. 10?

Whilst there is progress, I do not feel there is enough clarity to ensure a rate cut in December. Inflation has been easing steadily, with softer goods prices and moderating wage growth. But housing and core services remain sticky, which is keeping inflation above the 2% target.

This gives hawkish FOMC members reason to argue that policy shouldn’t be loosened too quickly. The labour market is cooling, with job gains slower, and wage pressures are easing without a surge in unemployment.

These trends suggest that the current policy is restrictive and may soon warrant adjustment to avoid slowing the economy too much. Overall, both inflation and employment are moving in the right direction, but not decisively enough to guarantee a rate cut. With the committee already divided, the December verdict remains tricky to call either way.

4. What does another US Fed rate cut mean for the Indian stock market? Do you think it will impact FII outflows from Indian markets, considering foreign investors have largely maintained a cautious stance on India in 2025?

I think another Fed rate cut would likely be a supportive signal for the Indian stock market, though the impact may not be immediate. Lower US interest rates weaken the USD and reduce US bond yields, making emerging-market assets relatively more attractive.

This can improve global risk appetite and create room for foreign investors to rotate some capital back into markets like India. For domestic equities that are in rate-sensitive sectors such as banks and real estate, the sentiment boost could be meaningful.

Foreign investors have been cautious toward India due to high valuations, concerns over earnings sustainability, and shifting global macro conditions. A Fed rate cut may ease some of that pressure, but FIIs will still consider India’s pricing premiums against opportunities in other emerging markets.

Overall, a Fed cut would reduce the downside risk from global liquidity tightening and could reverse FII outflows. But sustained inflows into India will depend more on domestic earnings strength, political stability, and valuation comfort rather than just on US policy alone.

5. With trade deals and tariffs still being an overhang for global equity markets due to the impact on macro numbers, do you think the Fed will revise its inflation and GDP growth forecast in the coming policy verdict?

I think there is a good chance that the Fed will reassess its inflation and GDP growth forecasts in the upcoming policy meeting. Tariffs, whether they have been introduced already or threatened for the future, will raise costs for businesses, disrupt supply chains, and create pricing volatility.

These effects can push inflation higher in the short term, even though demand may dampen. For the Fed, this creates an issue where inflation may appear firmer due to cost pressures, while underlying economic momentum could weaken because firms delay hiring or capex decisions.

The Fed may therefore revise its inflation forecast slightly upward to reflect tariff-driven price distortions, especially in goods categories. Whilst also, marking down its GDP growth projection to account for the drag on exports, business confidence, and manufacturing activity.

This wouldn’t necessarily indicate a shift in policy, but it would signal the Fed’s acknowledgment that external shocks are influencing the domestic outlook than before. However, I think the degree of revision will likely be modest. The Fed will want to avoid overreacting to geopolitical developments unless they show clear and sustained effects.

6. In the September meeting, FOMC's dot-plot of projections had then predicted two more rate cuts in 2025. Going by that agenda, what are your key expectations from the upcoming policy verdict? How many interest rate cuts by the US Fed do you foresee in 2026 and what would be the size of those cuts?

Going into the December meeting, the earlier guidance from September remains a useful benchmark. But with increased uncertainty, mixed inflation data, a cooling yet resilient labour market, and delayed economic reports, the Fed may avoid committing to a faster easing path.

My expectation is that the verdict will emphasise the importance data driven policy. The Fed will likely reiterate that inflation must continue trending convincingly toward 2% before substantial easing begins.

Looking ahead to 2026, the pace of rate cuts is likely to be measured. If inflation stabilises near target and growth remains moderate, the Fed could deliver two to three cuts in 2026, which would broadly be in line with historical normalisation patterns.

The size of these cuts would likely be 25 basis points each, as the Fed typically prefers smaller, incremental adjustments when the economy is not in crisis. Larger cuts of 50 basis points would only come if recession risks rise sharply, which currently does not appear to be the Fed’s concern.

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