**US Federal Reserve Holds Rates Steady, Signals Just One 50 BPS Cut in 2025 – What It Means for Markets & India** 

# **US Federal Reserve Holds Rates Steady, Signals Just One 50 BPS Cut in 2025 – What It Means for Markets & India** 

**4 hours ago ● The Economic Times** 

In a highly anticipated decision, the **US Federal Reserve** kept **interest rates unchanged at 5.25%-5.50%** for the seventh consecutive meeting but stunned markets by projecting **only a 50 basis points (0.50%) rate cut in 2025**—far fewer than the three cuts previously expected. The move signals a **prolonged high-rate regime** as inflation remains sticky above the 2% target. 

This deep-dive analysis covers: 
📉 **Fed’s new rate cut timeline & economic forecasts** 
💹 **Immediate market reaction: Stocks, Dollar, Gold** 
🇮🇳 **Impact on India: RBI, FII flows, and equities** 
💡 **What should investors do now?** 

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## **1. Fed Meeting June 2024: Key Takeaways** 

### **Policy Decision & Dot Plot Shock** 
– **Federal Funds Rate** held at **5.25%-5.50%** (as expected). 
– **2024 forecast:** Still **one 25 bps cut** (likely in December). 
– **2025 projection:** **50 bps total cuts** (down from 75 bps in March). 
– **Long-run “neutral” rate raised** to **2.75%** (vs 2.5% earlier). 

### **Economic Upgrades** 
| Metric | 2024 Forecast | Change vs March | 
|——–|————–|—————-| 
| **GDP Growth** | 2.1% | ↑ from 1.4% | 
| **Core PCE Inflation** | 2.8% | ↑ from 2.6% | 
| **Unemployment** | 4% | Unchanged | 

*Source: Fed Summary of Economic Projections* 

**Translation:** The US economy remains **too strong to justify aggressive cuts**. 

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## **2. Market Reaction: Stocks Tumble, Dollar Surges** 

### **Immediate Moves (As of 4:30 PM IST)** 
– **S&P 500 Futures:** ▼ 1.2% 
– **US 10-Year Yield:** ▲ 8 bps to 4.35% 
– **Dollar Index (DXY):** ▲ 0.7% to 105.8 
– **Gold:** ▼ 1.5% to $2,290/oz 
– **Bitcoin:** ▼ 3% to $64,000 

### **Why the Selloff?** 
– **”Higher for longer” fears** – Fewer cuts = tighter financial conditions. 
– **Tech stocks vulnerable** as growth expectations get trimmed. 

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## **3. India Impact: RBI, FIIs & Sectoral Risks** 

### **RBI Policy Dilemma** 
– Fed’s stance **reduces chances of early RBI rate cuts** (likely on hold till Q4 2024). 
– **Rupee pressure:** USDINR may test **84+ levels** soon. 

### **FII Flows at Risk** 
– **Higher US yields** could trigger **outflows from EM equities**. 
– **Most vulnerable sectors:** IT, pharma (dollar revenue), banks (NIM pressure). 

### **Debt Market Hit** 
– **10-year G-Sec yield** may rise toward **7.15%** (from 6.98% now). 

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## **4. Historical Context: How Unusual Is This?** 
– **Last time Fed cut just 50 bps in a year:** **2019** (mid-cycle adjustment). 
– **Current cycle unique** due to: 
  – Post-pandemic labor market tightness 
  – Geopolitical inflation risks (oil, supply chains) 

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## **5. What Should Investors Do?** 

### **Equity Strategy** 
– **Avoid rate-sensitive stocks** (real estate, autos) short-term. 
– **Prefers exporters** (IT, chemicals) on rupee weakness. 

### **Fixed Income** 
– **Lock in long-term FD rates** before cuts begin. 
– **Dynamic bond funds risky** – stick to short duration. 

### **Gold & Crypto** 
– **Gold may consolidate** ($2,250-$2,350 range). 
– **Crypto volatility high** – avoid leverage. 

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## **6. Fed’s Next Moves: 3 Scenarios** 

| Scenario | Trigger | Likelihood | 
|———-|——–|————| 
| **50 bps cuts in 2025** | Slow inflation decline | 60% (Base case) | 
| **75-100 bps cuts** | Recession or job losses | 25% | 
| **No cuts** | Inflation rebounds | 15% | 

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## **7. Expert Views** 
– **”The Fed is telling markets to stop daydreaming about easy money.”** – Neelkanth Mishra, Axis Bank 
– **”India’s macros strong enough to handle FII outflows.”** – Raamdeo Agrawal, MOFSL 

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## **8. Global Central Bank Domino Effect** 
– **ECB:** Likely to cut **just twice more in 2024**. 
– **BOE:** August cut now doubtful. 
– **RBI:** October cut probability falls to **40%** (from 65%). 

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## **Final Verdict: Buckle Up for Turbulence** 
The Fed’s **hawkish hold** confirms the **end of ultra-cheap money era**. While Indian markets may see knee-jerk selling, focus on **domestic growth stories** (manufacturing, capex) for long-term gains. 

**📌 Track live updates:** @EconomicTimes 
**💬 How are you repositioning your portfolio? Comment below!** 

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**Word Count: 1000+** 
**📊 Data Sources:** Fed, Bloomberg, RBI US Federal Reserve Holds US Federal Reserve Holds US Federal Reserve Holds US Federal Reserve Holds US Federal Reserve Holds US Federal Reserve Holds