The two -day meeting of the US Federal Reserve (US Fed) starts on 16 September and the world’s eyes are on the decision. Between rising inflation, weak employment figures, and pressure from US President Donald Trump, Fed is expected to cut rates by 25 basis points (BPS) or one-fourth percentage. This announcement on 17 September will be seen not only on the American economy, but also on the global market including India.
Why focus on the decision of Federal Reserve?
Experts believe that the Fed will currently deduct only 25 basis points as this can further increase inflation. Chairman Jerome Powell has already indicated that “policy changes” may be necessary in changing circumstances. Trump’s tariff policy and strict immigration rules have increased pressure on inflation and employment. In August, unemployment in the US increased to 4.3 percent, while the new jobs declined to only 22,000.
Inflation became the biggest challenge
Although employment statistics are demanding cuts in interest rates, inflation remains the biggest concern of the Fed. The US Consumer Price Index (CPI) increased to 2.9 percent in August. Trump’s tariff war can increase it even further. This is why experts believe that a large cut of 50 basis digits is not possible at present, but by the end of the year a total of 50–75 basis digits may be possible.
What will be the effect on India?
The biggest question for Indian investors is how much this decision will affect the domestic stock market. According to experts, a slight cut of 25 basis points has already affected the market, that is, it will not cause any boom. But if there is a total cut of 50 basis points or more in the coming months, then the Indian market can be boosted. Also, Powell’s statement and his tone will also be important for investors.
