US Federal Reserve Maintains Interest Rates Steady at 3.50%-3.75% After Series of Cuts
Following a two-day policy meeting, the Federal Open Market Committee (FOMC) of the US Federal Reserve announced on Wednesday, January 28, 2026, that it has decided to keep its key interest rate unchanged within the range of 3.50% to 3.75%. This decision marks a pause after the American central bank implemented three consecutive rate reductions, beginning in September 2025. Over the course of the year, the Fed has lowered rates by a cumulative 75 basis points, following a period of stability since December 2024.
In an official statement, the FOMC clarified its position: "In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 per cent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks." This cautious approach reflects the Fed's ongoing evaluation of economic indicators and global uncertainties.
How the Fed's Stance Influences RBI's Monetary Policy Decisions
Experts highlight that the Federal Reserve's decision to hold rates steady carries significant implications for global monetary policy, particularly for emerging markets like India. Seema Srivastava, Senior Research Analyst at SMC Global Securities, explains that the US Fed's pause reduces pressure on countries such as India to implement aggressive rate cuts. A widening interest rate differential between the US and India could potentially trigger capital outflows and weaken the Indian rupee, posing risks to financial stability.
According to Srivastava, the Reserve Bank of India (RBI) is expected to prioritize economic stability in this context. This involves allowing time to assess the impact of previous rate cuts and ensuring that lower rates are effectively transmitted into the broader economy. She notes, "While India’s GDP growth remains resilient at 6.5–7% for FY26, food inflation risks and fiscal expansion from Budget 2026 weigh heavily on the RBI’s decision-making. Cutting rates further could support domestic credit growth and consumption, but it would also risk currency depreciation and financial instability if global investors perceive India’s monetary stance as too loose compared to the U.S."
Will RBI Cut Rates in February 2026? Diverging Expert Views
The market expert anticipates that the RBI is unlikely to announce another rate cut in its upcoming February policy meeting. Srivastava points out that the RBI has already reduced the repo rate by 125 basis points since February 2025, bringing it down to 5.25%. With the Fed's pause, she believes it is less probable that the RBI will opt for further easing in February. Instead, the central bank is expected to hold the repo rate steady, aligning with the Fed's cautious approach and focusing on key priorities such as rupee stability, inflation management, and maintaining fiscal credibility.
However, there is a contrasting perspective from global brokerage firm BofA Securities, which anticipates that the Indian central bank will ease rates by 25 basis points at the Monetary Policy Committee (MPC) meeting in February, lowering the repo rate to 5.25%. In a note, the firm stated, "In our view, given the persistent uncertainty on the growth outlook, the RBI will likely ease again, utilising the current policy space, and cut rates by 25bp in February MPC to 5.25%, coupled with significant liquidity injections, with a slightly longer-term assurance on liquidity."
The brokerage firm further suggests that if the RBI decides to cut rates in February, it could represent the final reduction in the current cycle. Conversely, if no cut occurs, the RBI may continue to provide dovish guidance to keep its options open for future adjustments. This divergence in expert opinions underscores the complexity of monetary policy decisions in a globally interconnected economy.
Disclaimer: This analysis is for educational purposes only. Readers are advised to consult with a qualified investment advisor before making any financial decisions.
