FOMC Rate Cut Analysis and Market Implications

By Ashwini Shami, Executive Vice President and Portfolio Manager, OmniScience Capital

The Federal Open Market Committee (FOMC) has adopted a neutral-to-accommodative monetary policy stance, carefully balancing labor market conditions with inflation dynamics.

Notably, the US core Personal Consumption Expenditures (PCE) price index has demonstrated an upward trajectory, climbing from 2.5% in May 2025 to 2.9% in August 2025—significantly above the Federal Reserve’s 2% inflation target.

Despite this inflationary backdrop, the Fed’s emphasis on economic uncertainty and downside employment risks signals a clear openness to further rate cuts, provided inflation doesn’t exceed current expectations.

While broader market indices showed limited reaction to the recent 25 basis point cut—largely due to market expectations already pricing in this move—we anticipate positive implications for the US economy in the near term.

This monetary easing could stimulate consumer spending and encourage fresh corporate capital allocation. Additionally, it may catalyze Foreign Institutional Investor (FII) flows toward emerging markets, including India.

Combined with potential progress on US-India trade relations, these FII inflows could provide near-term support for Indian markets.

Given these developments, a 25-50 basis point rate cut by the Reserve Bank of India (RBI) at the upcoming Monetary Policy Committee meeting scheduled for month-end appears increasingly likely, as policymakers seek to maintain interest rate parity.