US Fed Meeting: Crude oil prices are volatile due to the Iran conflict. Rising oil prices will increase transportation costs, which will in turn increase the prices of other commodities, raising the risk of further inflation.
US Fed Meeting: US Fed keeps interest rates stable
US Fed Meeting 2026: The Federal Reserve, America's central bank, has decided to keep interest rates stable for the fifth consecutive meeting. At the meeting, which ended on July 29th, the Fed maintained its benchmark rate at 3.5%-3.75%. As already mentioned, this is the Fed's fifth consecutive policy meeting this year in which interest rates remained unchanged.
What is the Fed's stance on inflation?
The ongoing war between Iran and the United States poses a risk of oil prices rising again. The Fed is keen to see what lasting impact this supply shock will have on inflation. Chairman Kevin Warsh emphasized the Fed's commitment to maintaining price stability, stating that the Fed Reserve is striking a balance between controlling inflation and maintaining economic stability.
The Fed chief made it clear that the central bank will not make any hasty moves to change interest rates that could plunge the US economy into recession. US inflation currently stands at 3.5% on a year-over-year basis. The Fed is confident that tight monetary policies will gradually bring it back to its ideal 2%. The Fed chief said, "We have begun a new chapter, and we understand that inflation that has been above target for more than five years cannot be corrected in nine weeks, or even in a month by a slight decrease in prices. The Fed will not waver from its commitment to bring inflation back to the 2% target."
The result of internal disagreements within the Federal Reserve
At the Federal Reserve meeting, three members believed that inflation had remained above the 2% target for more than five years, so interest rates should be immediately cut by 0.25%. In contrast, the majority, led by Kevin, believed that it would be premature to raise rates immediately amid the supply shock caused by the Iran-US war and volatility in oil prices. This could hurt US economic growth.
Impact of Fed Reserve's decision on India
The Fed Reserve's decision not to raise rates will provide stability to the Indian stock market. The threat of a major sell-off in the Sensex and Nifty has been averted. This Fed decision has also provided relief to people in India from expensive loans, because when the Fed raises interest rates, the Reserve Bank of India also increases the repo rate to stabilize the rupee and control inflation. This makes home loans and car loans more expensive in India.
This single decision also saved the rupee from a major decline, because when the Fed raises interest rates, investors withdraw large sums of dollars from the Indian stock market and invest them in the US stock market. This strengthens the dollar but weakens the rupee. Therefore, the stable rates helped stabilize the rupee.
