US Federal Reserve Cuts Rate by 25 bps to 3.75-4%: Sensex and Nifty Falls in Early Trade

October 30, 2025: The US Federal Reserve has reduced its benchmark interest rate by a 25-basis point. US Fed Chair Jerome Powell announced the rate cut, lowering the target range to 3.75%-4% after concluding a two-day meeting yesterday, on October 29. The rate cut has sent waves of caution to Indian markets as Indian investors expect the dollar to weaken, pushing crude oil and gold prices higher.

As of 10:30 AM, the Sensex is down by 0.48%, or 405.08 points, and is trading at 84,592.05. On the other hand, Nifty is also down by 0.46%, or 118.95 points, and is trading at 25,934.95.

In its official statement, the Federal Reserve said, “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by a 25 basis point to 3.75–4%”

Why the Rate Cut?

The Federal Reserve has long said it is focused on ensuring growth in the US market. It was triggered by the continuously high consumer inflation. In September, the Consumer Price Index (CPI) in the US rose by 3% year-on-year, compared to 2.9% in August 2025. This pushed the US Federal Reserve to reduce the rate further to ensure the US economy stabilises.

This is the second time that the Federal Reserve has reduced the interest rate. In September, it reduced the interest rate by a 25-basis point to 4%-4.25%. This was the first rate cut by the Federal Reserve since December 2024.

When announcing the rate cut in September, Jerome Powell said that although the economic activity in the US is increasing at a moderate pace, inflation still remains high. It triggered assumptions that the US Federal Reserve may further cut the interest rate, which was announced today.

How Will it Affect the Indian Markets?

Whenever there has been a rate cut by the Federal Reserve, the Indian markets have reacted cautiously in the short term. India is a heavy oil importer, which is directly affected by the dollar strength. With the new rate cut, it is expected that the dollar will weaken, leading to a rise in Crude oil prices. Furthermore, gold prices are also likely to increase, as investors invest more due to a weaker dollar. Asian markets are also trading mostly in the red, as global signals turn generally negative.

However, in the medium-to-long term, the rate cut by the Federal Reserve will lead to more investments by Foreign Institutional Investors. This happens because a rate cut in the US makes the US bonds less attractive to the investors, who then look towards other emerging markets such as India for higher returns. With increased investments in India, the demand for rupee rises, leading to a stronger rupee against the US dollar. These factors generally lead to a higher liquidity in the Indian stock market, with support from institutional investors and positive global signals.

For today, the Indian stock market is expected to experience volatility throughout the day. However, it is expected to stabilise in the coming week with the expectations of more foreign inflows, stronger rupee and improved liquidity.

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