Noida, June 18, (APAC Media): The Federal Reserve kept interest rates unchanged at 3.5%–3.75% at its latest policy meeting, the first chaired by Kevin Warsh, while signalling that borrowing costs could remain elevated for longer amid persistent inflation pressures.
In its post-meeting statement, the central bank said incoming data would guide future policy decisions, marking a shift away from strong forward guidance.
Warsh emphasised a more data-dependent approach, while cautioning that inflation remained above the 2% target despite signs of moderation in some price components.
The Federal Open Market Committee (FOMC), in a statement backed by all 12 members, said, “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong.”
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“Job gains have matched labour force growth, while the unemployment rate has remained largely unchanged,” it added.
The decision carries implications for emerging economies, including India, where capital flows and currency stability are closely tied to US monetary policy.
For India, a stronger dollar could increase pressure on the rupee and trigger volatility in equity and debt markets as foreign portfolio investors adjust allocations toward US assets. Higher US yields may also raise the cost of external commercial borrowing for Indian corporates, particularly in infrastructure and capital-intensive sectors.
Reacting to the Fed’s decision, President Donald Trump said: “It’s alright… whatever.” When asked about the prospect of rate increases, he added: “It could happen… it’s hard to believe,” arguing that such moves “just keep the country down” and were “so unusual”.
However, Trump also praised Fed Chair Kevin Warsh, whom he nominated to replace Jerome Powell, saying, “We have a very good guy over there now, so I’m guided by what he wanted.”
In a post-meeting press conference, Fed Chair Kevin Warsh described the leadership transition as “a natural and timely opportunity to reaffirm its mission and to review current practices”.
The Reserve Bank of India is expected to maintain a watchful stance to manage currency volatility and liquidity conditions.
Export-oriented sectors such as information technology may benefit from a weaker rupee, which boosts overseas revenue realisations, even as broader financial conditions tighten.
Inflation stood at 3.8% in April, above the Fed’s target. The recent rise has been attributed in part to geopolitical tensions, including U.S. strikes on Iran and subsequent retaliation that disrupted shipping through the Strait of Hormuz, a critical global trade route.
The disruption in the Strait of Hormuz led to a spike in global energy costs, which the U.S. Bureau of Labour Statistics (BLS) has identified as a key contributor to recent inflationary pressures.
Earlier this month, President Donald Trump addressed rising living costs, saying: “I love it. The numbers were great. You know what I really love? I love the inflation.”
Overall, the decision underscores a transition toward more restrictive and less predictable US monetary policy, with spillover effects expected to be closely monitored across emerging economies in the coming quarters.
News Agency Inputs
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Disclaimer: Views expressed are those of experts and do not reflect APAC Media. This is for informational purposes only, not financial advice. We are not responsible for investment decisions. Please consult a qualified financial advisor before investing.
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