Sensex, Nifty: Will US Fed leave interest rate unchanged today? Eyes on Jerome Powell, FOMC dot plot

Sensex, Nifty: Stock market investors would be eyeing the outcome of US Federal Reserve two-day policy meet, where the Fed Chair Jerome Powell is expected to maintain status quo on the interest rate amid the growing uncertainty over tariffs and a risk of stagflation. Investors would, however, keenly await the 'Dot plot' that may give hint of whether more than two rate cuts are likely this year, and also the balance sheet. 

As far as the US economy is concerned, the US labour market is still holding up and probably in a better position than in mid-2024. While there has been some waning of consumer confidence and loss of sequential momentum, Nirmal Bang Institutional Equities said it does not see any concrete evidence of recessionary conditions. 

"US real wage growth is holding up while household debt is at multi decadal lows suggesting incremental room for households to increase leverage particularly if interest rates moderate. Moreover, delinquencies remain well contained except for credit card delinquencies," it said.

Powell too, in his Congress Testimony, suggested that inflation must slow down further before rates can be lowered, as impact of tariffs are yet to be deciphered.

Nirmal Bang continued to see room for a rate cut of 50 basis points or more in the US, which could be accentuated by any softening of economic conditions. In addition, it sees limited tolerance for elected governments globally to inflict pain on the populace via recessions as a result of which business cycles are getting shorter and less pronounced, with stronger and swifter countercyclical policy, Nirmal Bang noted.   

On Tuesday, the S&P BSE Sensex closed 1,131.31 points higher at 75,301.26. The NSE Nifty50 settled 325.55 points higher at 22,834.30.

Foreign brokerage Nomura said rates are likely to remain on hold at the March FOMC meeting as the Fed remains patient amid growing uncertainty. It expects the summary of economic projections to highlight slowing growth and higher price pressures, reflecting the impact of President Trump’s recent trade actions. 

"The median rate projections in the dot plot are likely to remain unchanged through 2027, with the Fed still signaling two cuts in 2025. Chair Powell’s press conference is likely to emphasise ongoing uncertainty. Powell has been less willing than many of his colleagues to take a clear stance on the inflationary impact of tariffs, noting that it is important to focus on the total impact of the administration’s policies," Nomura said.