KEY HIGHLIGHTS
- US Federal Reserve cuts interest rates by 0.25% for the third time in a row.
- Diverging views inside the committee show rising uncertainty about future cuts.
- Rate cuts may slow from 2026, with projections hinting at only gradual relief.
The US Federal Reserve has gone ahead with another 0.25% rate cut, and this one came with a bit of drama.
For the first time in years, the voting itself showed a split — something that usually hints at bigger economic worries.
The move brings the key interest rate down to 3.5%–3.75%, marking the third straight cut. But the real story is what lies ahead: the Fed may slow down sharply from 2026.
US Fed Cuts Rates Key Details
| Topic | Latest Update |
|---|---|
| Current Rate Cut | 0.25% (25 bps) |
| New Rate Range | 3.5% to 3.75% |
| Vote Outcome | 9–3 (No consensus) |
| Members Against Cut | 2 opposed any cut |
| Member Supporting Larger Cut | 1 wanted 0.50% cut |
| Future Projection | Rates may fall to 3% by 2027 |
| Last Time Fed Lacked Consensus | September 2019 |
| Market Reaction | US markets recovered, light buying seen |
The Vote That Surprised Everyone
Usually, Fed decisions look unanimous from the outside.
Not this time.
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The 9–3 vote clearly showed disagreement:
- 2 members didn’t want any cut.
- 1 member wanted a bigger 0.50% cut.
This makes it the first split decision on a rate cut since 2019.
For Indian investors and NRI community watching global cues, this is a big hint: the US is unsure how fast they should ease borrowing costs.
What the Fed Is Projecting Now
The Fed’s internal roadmap shows things slowing down from here.
- Cuts may come at a very slow pace through 2026 and 2027.
- The majority expect rates to stay around 3.5% till end-2026.
- By 2027, rates might settle near 3% — not a lot of relief, but steady.
So the idea of rapid cuts?
Not happening, at least for now.
What Jerome Powell Said
Fed Chair Jerome Powell kept things balanced:
- The US economy is still growing moderately.
- Consumer spending remains strong, which is keeping things stable.
- But the housing market is weak, and inflation is still a worry.
His tone suggests:
Yes, we’re cutting rates… but don’t expect fireworks.
How US Markets Reacted
As expected, markets didn’t panic.
- Dow Jones held its gains.
- S&P 500 bounced back after a quick dip.
Since the cut matched expectations, traders reacted with calm buying — a “thik hai yaar, this was expected” moment.
What This Means for India
Whenever the US cuts rates, it indirectly impacts India:
- Rupee movement can get affected.
- FIIs may adjust their inflows/outflows.
- Borrowing costs globally may soften over time.
But with the Fed signalling a slow path ahead, Indian markets may not see any dramatic shift immediately.
Frequently Asked Questions
1. Why did the US Fed cut rates again?
To support moderate economic growth and manage inflation risks while keeping borrowing conditions smoother.
2. Will this impact Indian interest rates?
Not directly, but global liquidity and FII behaviour can influence India’s financial markets.
3. Are more cuts expected soon?
The Fed’s own projections say the pace will slow, with very limited cuts expected from 2026 onward.
