In a world twitching for cues, the US Federal Reserve has chosen stillness. Interest rates remain frozen at 4.25–4.5%, as the central bank clings to caution amid a storm of rising inflation risks and unemployment fears. Markets may have priced in the pause, but the real action is just beginning, and India’s investors would do well to buckle up.
“Risks of higher unemployment and higher inflation have risen… we think we can be patient,” Fed Chair Jerome Powell said, dropping the kind of soundbite that rattles trading desks from Wall Street to Dalal Street.
Adding context, Akshay Chinchalkar, Head of Research at Axis Securities, summed up the Fed’s dilemma sharply: In their first policy meeting since President Trump announced sweeping tariff measures, the Fed kept rates constant as was largely expected, and Chair Powell made it clear that they aren’t in any hurry to tweak monetary policy amid elevated tariff-led uncertainty. He cautioned that while inflation risks could be transitory, if tariffs persist, a pick-up in inflation and joblessness, besides a slowdown in growth, may follow.
Yet for now, with US unemployment steady around 4% and the economy holding its posture, the Fed is playing the waiting game. Chinchalkar added that traders are already penciling in three rate cuts before year-end — a setup that should keep equity investors optimistic.
“Resultantly, local stocks stand to benefit from a global equities rally besides domestic tailwinds such as hopes of policy easing from the RBI, better-than-expected Q4 earnings, depressed oil prices and expectations of a trade deal with the US,” the analyst said.
On the ground, Wall Street traders aren’t expecting the next Fed rate cut until July or September, according to the CME FedWatch tool.
Also read | US Federal Reserve holds rates steady amid tariff-induced uncertainty
Meanwhile, FIIs aren’t waiting for the next dot plot to make a move.
The net long-to-short ratio in index futures has surged past 1, its highest since October 4th — signaling that FIIs are net long for the first time in seven months. That’s a significant posture shift.
Since April 15th, FIIs have gone on a buying binge, snapping up ₹47,000 crore worth of Indian equities in just 14 sessions. Add to that the aggressive Put writing at the 24,300 strike price, and it’s clear that the street is betting on support, not a slide.
“This is neither a hawkish nor a dovish change – simply an acknowledgement of the stagflationary risks imparted by trade policy,” Emkay Global noted, adding that unless the labour market cracks visibly, the Fed may stay sidelined through summer — with September being the earliest window for a rate tweak.
“The Fed chief will not accommodate President Trump’s demand for rate cuts. The Fed’s action will be data dependent,” added Dr. VK Vijayakumar, Chief Investment Strategist at Geojit.
The bottom line? While Powell locks his guns in the holster and watches the horizon, global money is already chasing risk and Dalal Street looks ready to oblige.
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