On June 18, 2025, the U.S. Federal Reserve (Fed) kept its main interest rate unchanged at 4.25 % to 4.50 % bloomberg.com+125paisa.com+12theguardian.com+12. Policymakers did this while warning about rising inflation, slowing growth, and global uncertainties like new tariffs.
⚠️ 1. Fed Paused but With Warning
- The Fed chose no change, but with caution.
- They see risks from new tariffs that could push up prices.
- They flagged the danger of stagflation (slow growth with high inflation) .
🔢 2. Updated Outlook for 2025
| Indicator | June Forecast | March Forecast |
|---|---|---|
| GDP Growth | 1.4 % | 1.7 % |
| Inflation (PCE) | 3.0 % | 2.6 % |
| Unemployment | 4.5 % | – |
- Growth rate cut.
- Inflation now above target.
- Job market slowing .
📉 3. Rate Cuts Could Happen but Later
- The Fed said two 0.25 % cuts may come later in 2025 .
- But 7 out of 19 policymakers think rates should not be cut this year.
- Market view: September–October could be the earliest for cuts .
🌍 4. Why It Matters Globally
- The Fed is wary of tariff-driven inflation .
- Other central banks in Europe, UK, and Japan are being cautious too .
- The Fed remains independent, not influenced by political pressure—despite voices like Trump wanting cuts .
🇮🇳 5. What This Means for India
- Rupee & Forex Impact
A stronger dollar from Fed caution may weaken the rupee . - Foreign Investment Flow
If U.S. becomes riskier, global investors may withdraw from markets like India . - RBI Policy Response
RBI likely to hold rates steady, avoiding unnecessary cuts that could harm the rupee or increase inflation . - Market Sentiment
Indian stock markets may see volatility in the short term but shouldn’t impact India’s long-term growth story .
📌 6. Broader Effects Around the World
- The U.S. dollar may strengthen until rate cuts happen
- Gold may rise as a safe haven asset
- Oil prices may drop if global growth slows .
- Global markets likely to remain sensitive and jittery, but strong economies could bounce back faster .
🧭 7. Is It Stagflation?
- It’s early to say, but signs are worrying:
- Low growth
- Higher inflation
- Slowing jobs
- Fed is watching, but not panic yet
🔁 8. India’s Next Moves
- RBI likely to stay on hold, as overseas liquidity tightens .
- India’s strong growth fundamentals remain, but global caution may cause volatility in currency & markets .
✅ Summary
- U.S. Fed held rates at 4.25–4.50%, citing tariff pressures, rising inflation, and slowing growth.
- Fed predicts two rate cuts by year-end, but many Fed members disagree.
- Markets expect cuts by September–October 2025.
- These signals affect the dollar, rupee, global trade, and Indian markets.
- RBI may remain cautious, prioritising both inflation control and currency stability.
- Globally, expect volatility, safe-haven demand, and care in markets until U.S. policy direction becomes clearer.
