US Rate Cut May Open Door for RBI to Lower Interest Rates, Say Experts

The US Federal Reserve has cut its key interest rate to between 4% and 4.25%, and experts believe this move could give the Reserve Bank of India (RBI) more room to cut rates as well — a step that could help boost the Indian economy.

Analysts say the Fed’s latest decision signals two more possible rate cuts this year. Lower interest rates generally make borrowing cheaper for businesses and consumers, which can encourage investment and growth.

Vishal Goenka, Co-Founder of IndiaBonds.com, said this is a good time for investors to look at bonds, expecting more rate cuts in the coming months. He added that reducing interest rates and managing short-term government borrowing could help lower borrowing costs for companies and support the overall economy.

Arindam Mandal from Marcellus Investment Managers noted that the rate cut of 25 basis points (0.25%) was expected, and that the Fed’s message about possible future cuts shows it is staying cautious. However, inflation remains a concern.

He pointed out that inflation in the US is expected to stay above the Fed’s 2% target until 2027 — marking seven straight years of high prices. Rising tariffs and strong job numbers are part of the reason for this.

The US central bank is also worried about signs of a weakening job market. Unemployment is rising, especially among minority workers, and people are working fewer hours. Fed Chair Jerome Powell said the job market is slowing down on both sides — with fewer new jobs being offered and fewer workers available.

Despite the global news, Indian stock markets are expected to stay strong. Experts believe the current rally is being driven by hopes of better company earnings and positive developments in India-US trade talks.

In short, while the US rate cut reflects global economic worries, it may give the RBI more flexibility to cut rates and support growth at home without hurting investor confidence.