In what was Jerome Powell's final rate decision, the US Federal Reserve has decided to keep interest rates unchanged. Federal Open Market Committee kept its benchmark rate unchanged at 3.50%-3.75%, just hours after Powell's successor Kevin Warsh won the backing of a key Senate committee.
The Fed's decision to keep rates unchanged comes against the backdrop of a volatile geopolitical scenario as well as US' active involvement in the Iran War, which has driven energy prices higher.
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This, in turn, has led to higher prices at the pump and more expensive groceries. But the Fed has kept a 'wait and see' approach to the ongoing geopolitical landscape.
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Hopes of any potential rate cuts were marred by March's inflation figure, which had shot up to 3.3%, highest since May 2024, although the Fed's statement suggested it might cut rates next time it meets.
What's In Store For Indian Markets?
US Fed's decision to keep rates unchanged may have a neutral to short-term impact on Indian equity markets.
An early indicator is usually the GIFT Nifty, which is, in fact, trading flat heading into market open. This suggests that markets may not deviate too much at open, at least in lieu of overnight cues, including the Fed Rate decision.
What the rate decision could mean, however, is RBI's rate cut trajectory. Ajitabh Bharti, Executive Director and Co-founder, CapitalXB, believes US Fed's rate decision aligns with RBI's own pause earlier this April.
Bharti believes RBI will continue to keep rates higher for longer, especially in the midst of higher crude prices.
"With Brent crude surging toward $120/barrel, India faces high "imported inflation." The Fed's cautiousness confirms that global energy prices are the primary threat to price stability, which may force the RBI to keep Indian repo rates higher for longer to protect the Rupee," he said.
ALSO READ: Fed Keeps Interest Rates On Hold As Iran War Spikes Inflation Concerns
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