US Federal Reserve Cut Interest Rate by 25 bps: Indian Stock Market Set to Brace the Impact

On September 17, 2025, the US Federal Reserve has decided to slash the interest rates and hinted at two additional reductions by year-end. The move comes as the U.S. labour market shows signs of strain, even as inflation remains a lingering concern.

In a decision reflecting stronger consensus than expected, the Federal Open Market Committee (FOMC) voted 11-1 to lower the benchmark overnight lending rate by 25 basis points. This brings the federal funds rate to a range of 4.00% to 4.25%.

According to the Fed’s latest projections, inflation is expected to stay elevated longer than initially forecast. Officials now believe that the central bank’s 2% inflation target may not be reached until 2028, indicating a more prolonged battle with price pressures.

How Indian Stock Market Likely to be Impacted?

Indian equities are poised to open on a positive note, buoyed by global cues and the Fed’s predictable policy move. Early indicators showed the GIFT Nifty trading near 25,497, about 74 points above Wednesday’s Nifty futures close, indicating a firm start for benchmark indices Sensex and Nifty 50 on Thursday, September 18.

Global Market Reaction: Mixed Signals

Asian markets were largely upbeat on Thursday, mirroring Wall Street's mixed reaction to the Fed announcement. Investors welcomed the clarity on future rate cuts, even as Fed Chair Jerome Powell expressed caution over weakening job growth and persistent inflationary pressures.

• Japan’s Nikkei 225 climbed 0.26%
• South Korea’s Kospi rose 0.43%
• Hong Kong’s Hang Seng futures pointed to a slightly weaker open

Also Read: Gift Nifty Indicates a Positive Start for Indian Market After US Fed Announced a 25 bps Rate Cut

In the U.S., equity markets closed mixed following the Fed’s statement:

• The Dow Jones Industrial Average added 260.42 points (0.57%) to finish at 46,018.32
• The S&P 500 slipped 6.41 points (0.10%) to 6,600.35
• The Nasdaq Composite fell 72.63 points (0.32%) to end at 22,261.33

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