The US Federal Reserve’s decision to cut interest rates by 25 basis points has sent a clear signal for the Reserve Bank of India (RBI) to follow suit in its upcoming Monetary Policy Committee (MPC) meeting in early December, according to market experts on Thursday. 

They believe the Fed’s move, which brings the benchmark rate down to a range of 3.75–4.00 per cent, strengthens the case for a similar action by the RBI to support growth and ensure effective transmission of earlier rate cuts.

The rate reduction, the second this year, comes as the US government shutdown has clouded the economic outlook by disrupting key data releases.

The shutdown has forced agencies like the Bureau of Labour Statistics to halt the publication of crucial indicators such as employment and inflation figures, leaving policymakers with limited visibility on the economy’s performance.

Federal Reserve Chair Jerome Powell said the decision was taken amid “considerable uncertainty,” but made it clear that another cut in December was “not a done deal.”

Reacting to the development, Vishal Goenka, Co-Founder of IndiaBonds.com, said the move effectively gives the RBI a green light to lower its policy rate in the upcoming MPC meeting.

“The US Fed cut benchmark overnight rates by 25bps as expected. However, Governor Powell very distinctively highlighted that any further cuts in the December meeting are not a done deal. This is a clear green light for RBI to cut the repo rate in its next meeting in early December,” Goenka said.

He added that the RBI’s last policy was a “dovish pause” and that the time is now right for another cut to ensure proper transmission across the banking sector.

“For proper transmission of earlier rate cuts to come through, a flatter and lower long-end yield curve is required. With the US cutting rates, we expect RBI to move in the same direction, and long-end government bonds look attractive,” he noted.

Meanwhile, the Fed’s policy move also influenced global commodities. Manav Modi, Analyst – Precious Metals at Motilal Oswal Financial Services Ltd, said gold prices weakened after a brief recovery earlier this week as the dollar index and US bond yields rose following the rate cut.