Summary of this article
Analysts widely expect the US Fed to hold rates steady at 3.50-3.75 per cent range
Fed pause unlikely to disrupt Indian markets, but offers limited relief
FIIs are likely to remain cautious and selective
US Fed Interest Rate Decision Today: The United States Federal Reserve’s (US Fed) rate-setting panel, the Federal Open Market Committee (FOMC), began its two-day meeting on March 17 to assess the monetary policy outlook, amid a highly uncertain global scenario due to the ongoing US and Israel's war in Iran. The 12-member committee is set to conclude its meeting on March 18, after which US Fed Chair Jerome Powell will announce its decision on the benchmark lending rate for the world’s largest economy. The outcome is scheduled at 2:00 PM Eastern Time (12:30 AM IST on March 19).
The American central bank will also release its quarterly Summary of Economic Projections. This report lays out the Fed’s latest outlook for key indicators such as economic growth, inflation and unemployment, and investors will be watching closely for any signs of downward revisions.
The US Fed had cut interest rates in three consecutive meetings last year, before holding rates steady at its January meeting in the 3.50-3.75 per cent range.
US Fed Interest Rate Decision: Will US Fed Hold Rates This Time?
Analysts widely expect the US Fed to assume a wait-and-watch mode and maintain status quo with interest rates this time. Akshat Garg, head of research & product at Choice Wealth, expected the US Fed to hold rates “even as the Iran war complicates the macro backdrop." He added that "sticky inflation near 3 per cent, a softening labour market and heightened geopolitical risk in the West Asia tilt the US Fed toward a cautious pause rather than a hike or cut."
The Personal Consumption Expenditures (PCE) price index, the US Fed’s preferred gauge for inflation, rose 0.30 per cent in January 2026, taking the annual rate to 2.80 per cent, which is above the central bank’s 2 per cent target.
Excluding volatile food and energy prices, core PCE inflation rose 0.4 per cent on a month-on-month basis and 3.10 per cent on year-on-year basis. This core measure, which the Fed tracks more closely to understand underlying price trends, was 0.1 percentage point higher than in December.
However, this data is from before the US and Israel launched strikes on Iran in late February.
According to Ross Maxwell, global strategy operations lead at VT Markets, too, the US Fed is expected to hold interest rates at the upcoming FOMC meeting. He stressed that "the most important factors that investors should keep an eye on is the commentary at the press conference."
He further added, "Heightened geopolitical uncertainty from the Iran war and the inflationary pressure caused by rising oil prices means the US Fed is likely to pause further cuts for now."
The ongoing US-Israel-Iran war has spiked crude oil prices by more than 40 per cent.
As of 4:51 PM, the brent crude oil futures traded at $103.69 per barrel, up by 0.26 per cent, while the US oil benchmark West Texas Intermediate (WTI) crude oil futures was down 1.43 per cent at $94.16 a barrel.
Vinayak Magotra, product head & founding team at Centricity WealthTech, also believes the US Fed will keep rates unchanged. He said markets have already priced in the pause amid heightened geopolitical uncertainty.
According to the Chicago Mercantile Exchange’s (CME) FedWatch Tool, which tracks market expectations based on interest rate futures, there is a 98.90 per cent probability that the US Fed will keep rates unchanged at this meeting.
US Fed Interest Rate Decision: What It Means For India and Emerging Markets
For emerging markets like India, a status quo decision by the Fed is unlikely to cause major disruption, but it may not bring much relief either.
Garg explained, "If the US Fed leaves rates unchanged, emerging markets like India will face a neutral-to-mildly constrained environment rather than a sharp shock." He added that "higher US yields keep the dollar relatively firm and global liquidity tight, which caps broad risk-taking in EMs."
According to Maxwell, the impact on India “would likely be slightly supportive." However, he cautioned that "higher crude oil prices due to geopolitical tensions… can widen the current account deficit and contribute to domestic inflation."
Magotra also said the impact is likely to be limited. He added that while a pause "helps avoid additional pressure on currencies and capital flows," "elevated crude prices will keep overall risk sentiment fragile."
US Fed Interest Rate Decision: How Will FIIs React?
Foreign Institutional Investors (FIIs), who have already withdrawn Rs 77,214 crore since the Iran war started, are expected to stay cautious and selective, rather than turn aggressively bullish, according to analysts.
Garg said, "FIIs are likely to respond to a US Fed hold with a cautious, tactical stance rather than a big shift in allocation." He added that "if the tone remains dovish… FIIs may nibble at dips in Indian equities, especially in quality large-caps."
Maxwell echoed a similar sentiment, saying, "FIIs will likely respond cautiously to the US Fed’s decision." He explained that "if the US Fed signals that rates will remain elevated for an extended period, FIIs may maintain a selective approach, allocate funds toward safer US assets."
Magotra said, "Given recent FII outflows, investor sentiment is likely to remain cautious in the near term." He added that while a pause reduces downside risks, "it may not trigger an immediate reversal… FIIs are expected to stay selective amid global uncertainty."
