Fed’s June 2025 Meeting: When Jerome Powell’s FOMC starts a 2-day review, key things to pay attention to
Investors around the world are on the verge of making a decision on interest rates on June 18 as the Federal Open Market Committee (FOMC) begins its two-day policy meeting today. While the U.S. Federal Reserve is widely expected to keep interest rates unchanged, markets are closely following the Fed’s guidance on U.S. tariff strategies and their potential efforts to grow and potential growth.
Recent inflation data provide some relief. The U.S. Title Consumer Price Index (CPI) was 0.1% in May, up 2.4% year-on-year, while the core CPI increased by 0.1% and 2.8% respectively – enhancing expectations for pauses.
However, in India, the market has historically shown sensitivity to U.S. monetary policy, and the Fed meeting remains a key volatility trigger.
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This is important for Indian investors
Any tips for future rate hikes could scare foreign portfolio investors (FPIs) who play a leading role in the Indian stock environment. A large portion of this traffic is through “carrying trade”, which is borrowed in the low-interest market in the United States and invested in higher yield assets in India. As a result, any tightening of the Fed tightens will narrow this profit margin, making the Indian market less attractive.
The Fed’s four hiking trails
1) Capital Outflows – Higher U.S. interest rates attracted investors to return to U.S. assets, triggering FPI outflows from India.
2) More powerful USD – Rate hikes boosted the USD, weakened the rupee and further eroded FPI returns.
3) Increased lending costs – Globally and domestically, interest costs increase, affecting company profitability and credit needs.
4) Increase in market volatility – Short-term investors often exit emerging markets, triggering sharp labor indexes.
RBI’s defensive performance
To offset potential outflows, the Reserve Bank of India has been steadily building its foreign exchange reserves. It also has the flexibility to make rate decisions and cut off space if the peak fluctuates. Central banks closely reflect signals to maintain policy stability without hurting growth.
When the Fed cuts fees
On the other hand, the wealthy Fed is usually a headwind for Indian stocks. Apt example: Sensex surged to record heights the next day in October 2019 after the third cut in the Fed’s annual cut. Lower U.S. interest rates make Indian assets more attractive to global investors, especially when domestic inflation is under control.
High alert market
The Fed is expected to hold prices, but its tone may be adjusted, and Indian market participants will listen closely. Any sign of softness in the Fed’s outlook can boost sentiment, and the Hawkesh signal may restart volatility in the stock, currency and bond markets.
With the FOMC decision in late June 18, Indian businessmen will have a possible turmoil in the coming week, which could once again prove how much Wall Street has impacted Dalar Street.
