FOMC meeting: Key takeaways for Indian investors as doubts emerge over Fed rate cut
Even as the dot plot continued to project two potential rate cuts ahead, analysts said a rate cut is unlikely in 2026, given the inflation trajectory.
- Mar 19, 2026,
- Updated Mar 19, 2026 1:31 PM IST
While Jerome Powell-led Federal Open Market Committee (FOMC) in its policy review decided to keep the federal funds rate unchanged at a range of 3.5 per cent to 3.75 per cent overnight, Indian investors may brace for turbulent times ahead, analysts warned.
Even as the dot plot continued to project two potential rate cuts ahead, analysts said a rate cut is unlikely in 2026, given the inflation trajectory. The Fed Chair emphasised that rate cuts are conditional rather than assured, making the Fed’s message hawkish at the margin, said Deepak Agrawal, CIO-Debt at Kotak Mahindra AMC.
Explaining further, Agrawal said inflation is still expected to ease over the course of the year, but Powell acknowledged that progress has slowed compared with earlier expectations, with tariff‑related pressures and rising energy prices posing near‑term upside risks.
A hawkish Fed may add to the RBI's policy constraints ahead, with the Iran crisis persisting longer than expected. RBI's ability to stabilise the rupee through forex management will be limited in the current scenario, and the its dilemma going ahead will be between forex intervention and tolerance, Emkay Global said.
A weak rupee is hurting foreign flows, with FPIs pulling out Rs 77,214 crore worth stocks in March alone. Foreign brokearge Goldman Sachs recently said the domestic currency could hit 95 a dollar level in a year.
"The absence of a policy bias seems to be the message, and it is likely that the Fed will be on an extended pause till more clarity emerges around the effects of the Iran crisis (and fading tariff inflation)," Emkay said.
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities said: "Powell bluntly said that if we don't see progress on inflation, then there won't be a rate cut. It was tariffs till yesterday and now, the oil shock is leading to harder inflation. The projections of core PCE inflation were also revised upwards to 2.7 per cent, leading to limited room for rate cuts this year."
Sheth said markets are going to face a turbulent time in the months ahead as US 10-year yields have hardened again. He said the dot plot also indicates only one rate cut expectation by the committee members this year. "In our opinion even this one rate cut may be difficult to come by since oil prices are likely to stay elevated even if the conflict ended immediately, he said.
The Fed flagged growing concern over the “very, very low” level of job creation, noting that after adjusting for overcounting, there has been virtually zero net private‑sector job growth over the past six months.
JM Financial said the immediate market reaction indicates that the US markets perceived his commentary to be hawkish, which reflected in the selloff in bonds as well as equities. It said equity markets may go into risk-off mode with increased selling in the US, which should exert pressure on the Dollar index.
While Jerome Powell-led Federal Open Market Committee (FOMC) in its policy review decided to keep the federal funds rate unchanged at a range of 3.5 per cent to 3.75 per cent overnight, Indian investors may brace for turbulent times ahead, analysts warned.
Even as the dot plot continued to project two potential rate cuts ahead, analysts said a rate cut is unlikely in 2026, given the inflation trajectory. The Fed Chair emphasised that rate cuts are conditional rather than assured, making the Fed’s message hawkish at the margin, said Deepak Agrawal, CIO-Debt at Kotak Mahindra AMC.
Explaining further, Agrawal said inflation is still expected to ease over the course of the year, but Powell acknowledged that progress has slowed compared with earlier expectations, with tariff‑related pressures and rising energy prices posing near‑term upside risks.
A hawkish Fed may add to the RBI's policy constraints ahead, with the Iran crisis persisting longer than expected. RBI's ability to stabilise the rupee through forex management will be limited in the current scenario, and the its dilemma going ahead will be between forex intervention and tolerance, Emkay Global said.
A weak rupee is hurting foreign flows, with FPIs pulling out Rs 77,214 crore worth stocks in March alone. Foreign brokearge Goldman Sachs recently said the domestic currency could hit 95 a dollar level in a year.
"The absence of a policy bias seems to be the message, and it is likely that the Fed will be on an extended pause till more clarity emerges around the effects of the Iran crisis (and fading tariff inflation)," Emkay said.
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities said: "Powell bluntly said that if we don't see progress on inflation, then there won't be a rate cut. It was tariffs till yesterday and now, the oil shock is leading to harder inflation. The projections of core PCE inflation were also revised upwards to 2.7 per cent, leading to limited room for rate cuts this year."
Sheth said markets are going to face a turbulent time in the months ahead as US 10-year yields have hardened again. He said the dot plot also indicates only one rate cut expectation by the committee members this year. "In our opinion even this one rate cut may be difficult to come by since oil prices are likely to stay elevated even if the conflict ended immediately, he said.
The Fed flagged growing concern over the “very, very low” level of job creation, noting that after adjusting for overcounting, there has been virtually zero net private‑sector job growth over the past six months.
JM Financial said the immediate market reaction indicates that the US markets perceived his commentary to be hawkish, which reflected in the selloff in bonds as well as equities. It said equity markets may go into risk-off mode with increased selling in the US, which should exert pressure on the Dollar index.