Fed reaction comment by Naval Kagalwala, COO and Product Head, Shriram Wealth Ltd

“The Federal Reserve continued their wait and watch approach and announced yesterday that it would keep its key benchmark rate unchanged. The US Central Bank has taken this decision on the back of uncertainty and inflation risks posed by the tariff discussions underway with different countries.

With an unemployment rate that has stabilized around 4% (weaker hiring trends offset by slowing growth in the labor force due to changes in immigration policies) and inflation at about half a percentage point above the Fed’s 2% target (with signs of increasing and a general expectation that it will touch 3% by the end of this year), majority of the members felt it was too early to cut rates. As quoted by the Fed Chief, they would want to do this efficiently, at the right time. The central bank was still in the early stages of understanding how the rewrite of import taxes and other policy changes will unfold in terms of inflation, jobs and economic growth.”