US Fed Chair Kevin Warsh Keeps Federal Reserve Interest Rates Steady: In his first policy meeting as Fed Chair, Kevin Warsh decided to leave US interest rates unchanged at 3.50%-3.75%. That was stability to the markets, but the central bank did also make it clear that no more interest rate hikes for this year can be discounted, as inflation remains on the high side. The Fed’s latest decision is a big call for Indian investors. Domestic equities have staged a sharp rally over the last four trading sessions, helped by easing crude oil prices, a US-Iran peace deal, and improving global risk appetite. However, the expectation of higher US interest rates can once again impact foreign investment flows, the rupee, gold prices and overall market sentiment.
Global markets widely anticipated a unanimous vote by the US Federal Open Market Committee (FOMC) to leave interest rates unchanged at 3.50% to 3.75%. But more importantly was the Fed’s new economic forecast.
Now, nine of the 18 policymakers see at least one rate hike in 2026, reflecting a growing worry inflation could stay elevated. Six officials expect that a more than quarter-percentage-point increase will ultimately bring the rate closer to the central bank’s long-term 2% target.
Eight expect the rate to remain unchanged, while only one expects a rate cut. One official declined to provide a rate path projection.
Fed Chair Kevin Warsh, meanwhile, refused to offer his view on interest rates, sticking with his earlier stance that the central bank should reduce its use of forward guidance to markets.
More cautious inflation view
The Fed also upped its inflation predictions. Policymakers now forecast the end-of-year PCE inflation – which the Fed considers its key gauge of inflation – at 3.6 per cent, much higher than the 2.7 per cent estimate projected in March.
Similarly, core PCE inflation was revised higher at 3.3 per cent from the previous 2.7 per cent estimate.
Meanwhile, the labour market has remained strong. The latest Fed forecast has unemployment at the end of the year at 4.3 per cent – the same as the latest number available and just a tick lower than the previous forecast of 4.4 per cent. Policymakers likely feel insufficient pressure to raise rates to increase growth.
What impact will the Fed decision have on Indian stock markets?
There were no immediate rate hikes expected, but US monetary tightening remains a possibility.
When interest rates rise in the U.S., it makes American government bonds more attractive for investors around the globe, pulling funds out of emerging markets and into the safer U.S. assets.
Such moves could impact the inflows from foreign portfolio investors (FPIs) to India and add to volatility on domestic equities.
Recent rallies in Indian markets have been phenomenal, with the Nifty 50 and the Sensex climbing nearly 4.0 and 4.5 per cent, respectively, in the past four trading sessions, mostly due to falling crude prices, but timely decisions matter more. Some part of these gains could be under pressure if the US eventually raises interest rates, with foreign investors rebalancing their portfolio allocation in the global market, some analysts noted.
Will the rupee be under pressure?
The Fed’s stance is also crucial for the Indian rupee.
The Indian rupee opened lower by 13 paise to 94.66 against the greenback in early trade on Thursday as the dollar firmed up after a much more hawkish stance by the US Federal Reserve raised expectations of longer, higher interest rates for the US economy. The rupee opens at 94.66 against the US dollar in early trade.
Emerging market currencies tend to look relatively weak when US interest rates go up and the US dollar strengthens.
A weaker rupee makes India’s import bill costlier, particularly for crude oil, electronics and other dollar-denominated imports. However, companies with large foreign currency borrowings might also have to bear higher repayment costs if the rupee depreciates further.
Lower oil prices are providing some relief
A steep decline in global crude oil prices offsets the Fed’s hawkish tone.
Brent crude dropped about 1.3% to about $78.50 a barrel after Washington and Tehran reached a temporary deal to end the conflict, reopen the Strait of Hormuz and relax sanctions on Iran’s oil exports.
Falling oil prices help ease inflationary pressures, improve the country’s trade balance and support corporate earnings for India, which imports the bulk of its crude oil needs.
This has been one of the key drivers behind the recent rally in Indian equities.
How are gold and silver reacting to the US Fed rate decision?
Gold and silver fell sharply on Thursday after the US Federal Reserve held interest rates constant but warned it was not yet finished with its war on inflation. Investors profited in the bullion space and chased higher-yielding assets on the perception rates will be held high for longer.
COMEX Gold (August 2026 contract) traded at $4,339.10 an ounce, down $42.30 or 0.97% from the prior settlement of $4,381.40. The metal moved from a session low of $4273.30 to a high of $4350.20, respectively, as investors responded to the Fed statement with much uncertainty across global markets.
Silver tumbled at a greater pace. In July 2026 COMEX silver fell $1.542 or 2.18%, to settle at $69.225 per ounce compared to $70.767 at the previous settlement. The metal hit session highs and lows of $67.92 and $69.92 during the day.
The initial blow came from the perception that U.S. interest rates will be higher for longer, making yields attractive to bonds compared to bullion, which doesn’t deliver a fixed return.
That said, the potential downside may be small. Sticky inflation, ongoing geopolitical tensions and uncertainty about the Fed’s next move are still encouraging many investors to maintain some exposure to gold and silver as safe-haven assets. Bullion prices will likely stay volatile until the US central bank’s policy path becomes clearer.
What should Indian investors watch for next?
The Fed has not ruled out further tightening so it is likely that global markets will continue to react to the economic data.
What Indian investors should look out for:
Foreign portfolio investors’ (FPI) buying and selling trends in Indian stock market
The movement of the Indian rupee against the US dollar
US inflation and employment data that could influence the Fed’s next move.
Crude oil prices remain a key driver of India’s inflation outlook and market sentiment.
For now, the Fed’s choice is one of stability rather than relief. Lower oil prices continue to support Indian equities, but the prospect of higher US borrowing costs could mean investors will have to brace for bouts of volatility in the months ahead.
(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The views, opinions, and recommendations expressed herein are those of the respective experts. Readers are advised to consult a qualified financial advisor before making any investment decisions.)
Priyanka Roshan is a business writer and assistant editor at the NewsX website who tracks everything from stock market swings and corporate earnings to personal finance trends and policy shifts. Known for turning fast-moving business developments into sharp, reader-friendly stories, she combines speed, accuracy, and a data-driven approach to break down complex financial news for everyday audiences.
With over 9.5 years of newsroom experience, Priyanka has worked with leading media organisations, including Moneycontrol, Times Now, and Ping Digital, covering diverse beats such as business, politics, technology, auto, travel, sports, and the world. From live breaking news desks to SEO-led digital storytelling, she specialises in creating engaging content that keeps readers informed without overwhelming them.
