Federal Reserve Rate Cut Drives Mixed Market Response - Indian Markets Are Poised To Open Higher

The Federal Reserve resumed its interest rate cut cycle by reducing rates by 25 basis points to a target range of 4.0-4.25 per cent, citing shifting risk dynamics in the economy. Fed officials projected two additional rate cuts this year, forecasting rates to reach 3.50-3.75 per cent by the end of 2025.

The central bank’s decision reflected growing concerns over labour market softening, including rising unemployment among minority workers and a declining workweek. Fed Chair Jerome Powell described the jobs market as experiencing a “curious kind of balance” where both supply and demand for workers have decelerated, warning of potential downside risks, including higher layoffs.

Markets initially rallied on the widely expected cut but closed mixed as investors processed the Fed’s employment-focused messaging. The Dow Jones gained 0.5 per cent, while the S&P 500 and Nasdaq declined 0.1 per cent and 0.3 per cent, respectively, retreating from record highs amid choppy trading.

Technology stocks underperformed after reports that China instructed major companies to halt purchases of AI chips from U.S. firms. Nvidia fell over 2 per cent and Broadcom dropped more than 3 per cent, intensifying concerns about U.S.-China tech tensions and supply chain vulnerabilities.

The rate cut aligns with President Trump’s policy preferences but falls short of the aggressive easing he has advocated. New Fed Governor Stephen Miran cast the sole dissenting vote, apparently favouring deeper cuts based on his economic projections.

While lower rates typically support risk assets through cheaper financing costs, the positive impact may be constrained if labour market weakness persists. The Fed’s Summary of Economic Projections showed wide variation among officials’ rate cut expectations, reflecting uncertainty about the economic outlook.

In commodities, gold retreated slightly from record highs near $3,700 per troy ounce despite expectations of continued Fed easing. Crude oil held firm above $64 per barrel, supported by supply concerns despite a significant U.S. inventory drawdown.

Nifty continued its upward rally yesterday by adding 91 points or 0.36%, to close at 25330. Nifty has risen for 11 out of the last 13 sessions by recovering more than 900 points from the recent swing low of 24404 made on 29th Aug 2025.

Nifty is in continuation of an uptrend with support placed near 25150, the previous swing high on the daily charts. On the higher side, 25550 and 25670 are the key resistances to watch out for.

Indian markets are poised to open higher on the back of positive global cues.

Source: HDFC Securities Prime Daily, 18 Sept 2025

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