Perspective on US FOMC Announcement by Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund

The FOMC meeting came at a time when inflation pressures are rising again, even before the full impact of the recent Iran conflict is reflected in the data. While the labor market remains relatively stable, there are emerging signs of weakening. This combination is not conducive to near-term rate cuts.

As expected, the Federal Reserve kept interest rates unchanged in the range of 3.50% to 3.75%. The Fed also indicated that it expects only one rate cut this year, most likely in the second half of the year. The positive takeaway was that the commentary was not as hawkish as some had anticipated.

Any policy easing will remain contingent on inflation moving closer to the 2% target and unemployment staying below the 5% threshold. A broader policy reset may emerge when the U.S. Senate holds hearings and we hear the views of the incoming Fed Chairman, Kevin Warsh. It will be interesting to see how he frames the case for rate cuts within the current macroeconomic backdrop.

For emerging markets such as India, elevated oil prices are already exerting pressure on the rupee and equity markets, while gold prices continue to strengthen amid heightened geopolitical uncertainty. It has already been a challenging year for India’s markets, first with the tariff developments and now the added uncertainty from the Iran conflict.

Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund