The United States Federal Reserve is gearing up for a significant policy shift in 2025, with economists predicting two interest rate cuts that could reshape global financial markets and impact economies worldwide, including India.
What the Latest Poll Reveals
According to a recent Reuters survey of financial market experts, the Fed is expected to initiate its easing cycle with a 25 basis point cut in December 2024, followed by two additional reductions throughout 2025. This marks a more cautious approach compared to earlier expectations of more aggressive rate cuts.
The Inflation Challenge Persists
The central bank's careful stance stems from ongoing concerns about stubborn inflation. Despite some cooling in price pressures, Fed officials remain wary of declaring victory too soon. The Reuters poll indicates that most economists believe the first rate cut will come later than previously anticipated.
Global Implications for Markets
This monetary policy trajectory carries significant implications for:
- Emerging markets, including India, which could see reduced pressure on their currencies
- Global capital flows as investors reassess risk and return profiles
- Commodity prices and international trade dynamics
- Central bank policies worldwide, particularly for the Reserve Bank of India
What This Means for India
The anticipated Fed easing could provide the RBI with more flexibility in its own monetary policy decisions. With reduced pressure from US rate differentials, Indian policymakers might have greater room to support domestic economic growth while maintaining their inflation-fighting credibility.
However, economists caution that the timeline remains fluid and dependent on incoming economic data, particularly inflation readings and employment figures from the United States.
