The United States Federal Reserve after its Federal Open Market Committee Meeting (FOMC) decided to pull back and not cut its interest rates further.

Interest Rates Retained

The US interest rate continues to remain at 4.25-4.50 per cent.

This comes to pass after the United States' central banking system resorted to the aggressive slashing of interest rates in the previous FOMC gatherings in order to inject liquidity and foster growth into the American economy and, according to some, to boost the market.

This decision to hold the interest rates goes against the US Fed's intentions of gradually cutting the interest rate.

Inflation Problem

A reason for this decision by the Jerome Powell-led Fed could be found in the rising inflation or consumer price index rate, which has remained an Achilles Heel for Powell & Co.

Previously, the headline inflation rate jumped to 2.9 per cent in December 2024, from its previous 2.7 per cent in November, marking a hattrick of rising inflation rate.

US Markets In Red

The American markets have understandably reacted negatively to this news.

The Dow Jones Industrial Average slumped to 44,713.52, after losing 0.31 per cent or 136.83 points. The index opened lower than its previous closing at 44,819.55 points.

When we look at the S&P 500 index, this marquee index also dropped in value.

The Standard and Poor Index dropped by 0.47 per cent or 28.39 points. This took the overall value of the index to 6,039.31 points.

The tech-heavy Nasdaq Composite was no different. The index dropped to 19,632.32 points.

The decline was a result of the slump in value by 0.51 per cent or 101.26 points.  

Will This Impact The Indian Markets?

Usually there is a ripple effect that has often been observed. The Indian indices tend to react to the developments at Wall Street, like most indices throughout the globe, given the centrality of the American financial system in the global economy.

Nevertheless, there have also been instances in the past, when the markets have not recated to such crucial happenings in the land of the free.

At the end of the day, there are domestic factors that play a role. And as of this trading week, after a boost from the RBI, via its Rs 60,000 crore OMO or open market operation, the Indian markets have been enjoying a relatively healthy period.

The indices have been in green over the past few days, with Sensex gaining over 1,400 points in two days of trade.

Will this recent US Fed decision dampen the spirits at Dalal Street, is something that remains to be seen.

The BSE Sensex closed on Wednesday at 76,532.96, after gaining 0.83 per cent or 631.55 points, by the end of the day.

The NSE Nifty on the other hand closed for the day at 23,169.50, with marginal gains of 0.028 per cent or 6.40 points.