Washington, D.C. : The US Federal Reserve is expected to announce its third interest rate cut of 2025, trimming the benchmark rate by 0.25% at today’s Federal Open Market Committee (FOMC) meeting. The move caps a volatile year marked by fluctuating inflation, trade tariffs, tight labor markets, and global market uncertainty.
Fed Chair Jerome Powell will hold a closely watched press conference at 2 PM ET, outlining the central bank’s updated economic projections and the likely pace of monetary easing in 2026.
Fed Signals Only One More Cut in 2026
According to advance guidance from the Fed’s Summary of Economic Projections (SEP), policymakers expect just one additional rate cut in 2026, reflecting ongoing inflation pressures tied to:
Trump administration trade tariffs,
Labor shortages, and
Supply chain bottlenecks.
Despite concerns from financial markets, the Fed appears cautious, aiming to avoid overstimulation while the economy remains resilient.
Economic Outlook: Growth Solid, Inflation Sticky
Updated forecasts show:
GDP growth: 2.1% in 2026
Unemployment: 4.2%
Core PCE inflation: 2.5% — still above the Fed’s 2% target
This dovish-yet-guarded stance follows the Fed’s September projections, which already signaled a slower path to normalization.
Market Reaction: Asian Shares Dip, S&P Futures Flat
Asian markets slipped early Tuesday, mirroring overnight declines on Wall Street as investors awaited Powell’s tone.
Meanwhile:
S&P 500 futures were flat,
Crypto markets continued sliding, with the “extreme fear” index at 19,
And US Treasury yields inched lower, signaling caution ahead of the announcement.
Trump’s Policies Add Complexity
The Fed is increasingly navigating a political minefield, balancing:
Tariff-driven price increases,
Trump-era industrial policy, and
Fears of a mild recession should trade disruptions worsen.
Though Powell remains committed to Fed independence, analysts say the central bank cannot ignore the inflationary impact of White House economic measures.
Implications for India and Emerging Markets
A US rate cut typically benefits emerging markets through cheaper dollar funding, but volatility remains elevated. For India in particular:
The rupee has remained relatively stable,
But Foreign Portfolio Investor (FPI) flows have been erratic,
With global risk aversion tied to US inflation expectations.
Analysts say a clearer Fed roadmap could reduce currency pressure across Asia.
What Markets Want to Hear
Investors will focus on:
The updated dot-plot,
Powell’s assessment of inflation trajectory,
And any indication of accelerated easing in early 2026.
Economists say a firm signal of confidence could buoy markets — but a cautious Powell could spark another round of risk-off sentiment.
