By:- Mr. Ajitabh Bharti, Executive Director and Co-founder, CapitalXB
“The US Federal Reserve’s decision to hold rates at 3.50%–3.75% aligns with the RBI’s own pause at 5.25% earlier this April. Both central banks are trapped in a “wait-and-see” mode as the Iran conflict disrupts global supply chains.
- The Energy Factor: With Brent crude surging toward $120/barrel, India faces high “imported inflation.” The Fed’s cautiousness confirms that global energy prices are the primary threat to price stability, which may force the RBI to keep Indian repo rates higher for longer to protect the Rupee.
- Market & FII Impact: For Indian investors, the Fed’s hold is a double-edged sword. While it prevents a massive sell-off, the lack of a rate cut means Foreign Institutional Investors (FPIs) might remain hesitant to move capital back into Indian equities until US yields soften.
- The EMI Outlook: For Indian borrowers, this global trend suggests that home and auto loan EMIs are unlikely to drop in the near term. As long as the Fed remains hawkish due to energy risks, the RBI has little room to ease domestic borrowing costs without risking currency depreciation.
- 2026 Forecast: While the Fed still projects one cut this year, Indian markets are bracing for a prolonged “high-for-longer” cycle, with any local rate relief likely delayed until the tail end of 2026”
