Powell’s Dovish Pivot Fuels Festive Cheer: Two More Rate Cuts Likely, Global Liquidity to Support India’s Rally

Mumbai | October 15

In a signal that could brighten festive spirits across Dalal Street, US Federal Reserve Chair Jerome Powell hinted that the Fed is on track for two more quarter-point rate cuts this year. Speaking in Philadelphia, Powell balanced caution with confidence — flagging slower hiring as a growing risk while assuring that inflation remains under control.

“The outlook for employment and inflation has not changed much since September,” Powell said. “Rising downside risks to employment have shifted our assessment of the balance of risks.”

His tone — measured but clearly dovish — sent a ripple of optimism through global markets.

Fed Softens Stance as Labour Market Cools

Powell’s remarks come weeks after the Fed’s first rate cut of 2025, which brought the benchmark policy range down to 4.00–4.25 %. The Fed chief acknowledged that while growth remains steady, the once-booming US labour market has started to cool.

“Payroll gains have slowed sharply,” he said, attributing part of the moderation to lower immigration and weaker participation rates.

He emphasised that monetary policy must now guard jobs as much as inflation, a clear sign the Fed is preparing the ground for more easing ahead.

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End of Quantitative Tightening

Powell confirmed the end of the Fed’s long balance-sheet runoff, signalling that quantitative tightening is over.
He defended the central bank’s policy toolkit — particularly interest payments on reserves — as vital for controlling short-term rates.

“Our ample-reserves regime has proven remarkably effective for supporting monetary and financial stability,” he said.

The $6.5-trillion Fed balance sheet still holds $4.2 trillion in US Treasuries and $2.1 trillion in mortgage-backed securities — and now, with runoff ending, liquidity is set to flow more freely across global markets.

Boston Fed’s Collins Supports Further Easing

Supporting Powell’s tone, Boston Fed President Susan Collins said further rate cuts are “prudent to support the labour market.”

“Inflation risks are more contained, but downside risks to jobs have increased,” she said.

She projected only a modest rise in unemployment and expects hiring to revive once tariff-related uncertainty fades.

Global Markets React; India in Focus

Bond yields dipped, the US dollar index slipped below 104, and Wall Street futures ticked higher — a clear read-through that markets expect continued Fed easing through 2025.
For emerging markets like India, the shift could not have come at a better time

What It Means for India: Liquidity, Flows, and Festive Tailwinds

Powell’s dovish pivot offers a powerful backdrop for India’s Samvat 2082 market outlook:

• Stronger foreign inflows: Softer US yields often trigger renewed FPI buying in emerging markets, supporting Nifty and Sensex momentum.
• Rupee stability: A weaker dollar eases imported inflation and may help the INR hold firm around 83 levels.
• Lower bond yields: With US borrowing costs cooling, India’s 10-year yield could soften, benefiting rate-sensitive sectors like banking, real estate, and autos.
• Broader equity appeal: Global liquidity returning during the festive season strengthens India’s position as the brightest growth story in Asia.

Economists believe the Reserve Bank of India can now hold its stance comfortably, focusing on growth and credit expansion through FY26.

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The Festive Lens: Global Easing Meets Domestic Strength

For Indian investors, Powell’s signal coincides with the muhurat trading season — a time traditionally linked with new beginnings and market optimism.
The Fed’s softer stance, combined with India’s robust earnings cycle and domestic liquidity, sets the stage for a potential breakout year in Samvat 2082.

“Global liquidity and India’s fundamentals are finally aligned — this could be the start of the next leg of India’s structural bull market,” says PL Capital Research.

Invest in the Moment- #MuhuratAagaya

As the world’s largest central bank turns dovish, it’s time for Indian investors to capitalise on opportunity. Open your PL Capital Demat Account today to invest with expert-backed research and capture the festive market potential. Visit Prabhudas Lilladher Private Limited to start investing smarter this Samvat 2082.