As widely anticipated, the US Federal Reserve cut its benchmark interest rate by a quarter of a percentage point (0.25 per cent) at its latest monetary policy meeting, marking the third consecutive reduction. The decision, however, revealed significant divisions within the committee. The Federal Open Market Committee (FOMC) voted 9–3 in favour of the cut. Governor Stephen Mirran, a known supporter of President Donald Trump, argued for a deeper 0.50 per cent reduction. Meanwhile, regional Fed presidents Jeffrey Schmidt and Austin Goolsby dissented in the opposite direction, insisting that no rate cut was warranted at all.
With the latest move, the US base rate now stands at 3.5–3.75 per cent. Mirran has now voted against the majority for a third straight meeting, while Schmidt registered his second dissent. This level of disagreement is notable: it is the first time since September 2019 that so many committee members have voted ‘against’ the rate decision. Analysts say this growing divergence is a warning sign that upcoming Fed meetings may be more contentious, and that the likelihood of further rate cuts could diminish. Investors were especially disappointed by the Fed’s newly released “dot plot,” which signals policymakers’ expectations of future interest-rate movements. The latest chart shows only one rate cut each in 2026 and 2027, a far slower trajectory than markets had hoped for. Fed Chair Jerome Powell emphasised that decisions would be driven by the evolving economic landscape, particularly the performance of US growth indicators.
Those supporting the rate cut argue that the American labour market has weakened and requires policy support. In contrast, dissenting members assert that inflation remains elevated and that tariffs, rather than borrowing costs, pose the greater economic risk. The underlying tension reflects a broader policy debate over whether the Fed should prioritise growth or remain focused on price stability. The reduction in interest rates is expected to affect households and businesses across the United States. Lower rates typically reduce the cost of home loans, auto loans, personal credit, and credit-card borrowing. At the same time, deposit rates offered by banks usually fall, reducing returns for savers. Yields on US Treasury securities also reacted immediately: the 10-year Treasury yield slipped to 4.13 per cent from 4.15 per cent. The US dollar weakened as well, with the dollar index falling 0.59 per cent to 98.64, its lowest level since October.
President Donald Trump, who has repeatedly criticised the Federal Reserve, condemned the latest rate cut as excessive. He warned that the decision risked fuelling further inflation, calling it “nonsense” and accusing policymakers of undermining US economic growth. Trump also lashed out at Powell personally, describing him as “heartless and stupid.”
Stocks surge despite market concerns
US stock markets rallied strongly after the Fed’s announcement. The Dow Jones Industrial Average rose 497.46 points, or 1.1 per cent. The S&P 500 climbed 0.7 per cent, while the Nasdaq Composite gained 0.3 per cent. Although investors found aspects of the dot plot discouraging, especially the projection of only one rate cut in both 2026 and 2027, several factors boosted market sentiment. First, the Fed signalled its intent to accelerate purchases of short-term government bonds, which markets interpreted as an additional support measure. Second, policymakers openly acknowledged that the labour market is weakening, prompting speculation that further rate cuts remain possible despite the conservative dot plot projections. Third, Powell reiterated that all upcoming rate decisions will be guided by economic data, which investors took as a sign that the Fed is not ruling out additional easing if growth falters.
The positive momentum in US markets spilled over into Asia. Japan’s Nikkei opened higher but later surrendered some gains. South Korea’s KOSPI, Hong Kong’s Hang Seng, Australia’s ASX200 all rose between 0.6 and 0.7 per cent. However, US futures showed a mixed pattern: while Dow futures remained positive, the Nasdaq and S&P futures slipped into the red, largely due to disappointing quarterly results from Oracle. The software giant’s earnings came in weaker than expected, triggering an 11 per cent plunge in its share price. In India, the Gift Nifty climbed 131 points in early trading, raising expectations that the Sensex and Nifty, after several days of losses, might rebound in today’s session. Meanwhile, India-US trade talks resumed with cautious optimism. The visiting US delegation described India’s latest proposal as “the best” they have received so far.
Corporate developments also influenced domestic sentiment. Adani Enterprises’ Rs 25,000-crore rights issue received a strong response from investors. In a separate move, French energy major Total Energies reduced its stake in Adani Green Energy through a Rs 2,778-crore block deal at Rs 970 per share. Jio Financial and BlackRock announced a joint investment of Rs 229 crore in their asset-management venture, Jio BlackRock AMC. Additionally, the central government is preparing to reconstitute the board of Indian Oil Corporation, indicating potential strategic changes.
Gold, silver and crude oil prices rise
Precious metals gained sharply following the Fed’s rate cut and the weakening of the dollar and bond yields. International silver prices surged 3.63 per cent to reach a record high of $62.58 per ounce, driven both by strong industrial demand and increased investor interest. Gold prices also rose, climbing by $25 to reach $4,232 in early trading. Similar upward movement is expected in Indian bullion markets as they open today. Crude oil prices edged upward as well. The market reacted to comments from Trump confirming that the United States had seized a Venezuelan oil tanker. West Texas Intermediate (WTI) crude rose 0.70 per cent to $58.87 per barrel, while Brent crude increased 0.58 per cent to $62.57. The combination of geopolitical developments, a weaker dollar, and expectations of firmer economic support contributed to the upward trend in global commodity prices.
