The US Federal Reserve is expected to wait for clear signs of economic slowdown—particularly in the labor market—before cutting interest rates, according to economists and industry experts. The Federal Open Market Committee (FOMC) recently decided to hold the federal funds rate steady at 4.25–4.5 percent, citing ongoing geopolitical tensions, trade uncertainties, and inflation risks.

Hemant Jain, President of PHDCCI, said the Fed’s decision is “commendable,” especially amid the 90-day tariff pause and elevated global uncertainty. He noted the Fed’s commitment to maximum employment and restoring inflation to its 2 percent target.

Fed Chair Jerome Powell acknowledged concerns about tariff-driven inflation, stating that “some of the cost will fall on the end consumer.” However, Powell emphasized that there is no immediate evidence of economic weakening and the Fed is “well positioned” to monitor the situation before taking action.

Experts from Emkay Global Financial Services said the Fed is unlikely to move until there is a “meaningful sign of weakness” in the labor market. They predict a possible rate cut in September, with current market pricing showing only a 10% chance of a cut in July and 63% for September.

The Fed also revised its 2025 outlook, lowering GDP growth to 1.4% and raising core CPI inflation to 3.1%, signaling a challenging macroeconomic landscape of slowing growth and persistent inflation.

Vaqarjaved Khan of Angel One noted that while US equity markets remained largely stable, short-term Treasury yields were volatile. A potential 50 bps rate cut in 2025 could improve global liquidity and benefit Indian markets, although risks from geopolitical tensions and tariffs remain.

Analysts expect the Fed to stay flexible and adjust policy as new data emerges.