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US Fed Cuts Rates by 25 bps Global Markets Brace for a Liquidity Wave
- Ripradaman R
- Dec 11
- 3 min read
The US Federal Reserve has officially cut interest rates by 25 basis points, bringing the benchmark range down to 3.50–3.75%.
This is one of the most anticipated macro events of the year and it has finally arrived.
After months of sticky inflation, geopolitical risk, and volatile equity markets, the Fed has delivered the first clear step toward monetary easing. This move could set the tone for how global markets behave from now into 2026.
Here’s a sharp breakdown of why the cut was made, what changes next, and how it affects stocks, crypto, India, and your money.
1. Why Did the Fed Cut Rates Now?
The Fed’s decision came after weeks of mixed macroeconomic signals.
Key Triggers for the Rate Cut:
✔ Inflation Cooling Gradually
PCE and CPI data showed enough moderation for the Fed to start easing.
✔ Labour Market Softening
Hiring slowed, job openings dropped, and wage pressures eased.
✔ Financial Conditions Tightened
High borrowing costs began weighing on corporate earnings and consumer credit.
✔ Global Economic Slowdown
Europe and China showed contraction risks, pushing the Fed to prevent spillover shocks.
This is the first proper step into a rate-cut cycle, which could continue in 2026 depending on inflation and labor trends.
Also read:
2. What Changes Immediately After the 25 bps Cut?
A single 25 bps cut may sound small but its global impact is massive.
✔ Liquidity Begins to Improve
Cheaper borrowing → more spending, more investment, stronger asset prices.
✔ Bond Yields Start Softening
Good for:
Debt funds
Long-duration bonds
Mortgages & loans
✔ Dollar Weakens
A softer dollar = stronger emerging markets.
✔ Risk Assets Turn Attractive
Equities
Crypto
Commodities
All typically rise when interest rates fall.
3. Stock Market Impact: US, Global & India
US Markets:
Growth stocks benefit the most
Tech and AI sectors may resume leadership
Small-caps get breathing space after months of stress
Global Markets:
A weak USD → foreign investors increase risk exposure.
India:
This is extremely positive for India because:
FIIs return aggressively in rate-cut cycles
Rupee stabilizes
Borrowing costs reduce
Corporate earnings improve
India could be one of the biggest beneficiaries of the Fed’s decision.
Interesting Read :
4. Crypto Market Impact: The Biggest Winner?
Crypto historically responds the strongest to Fed rate cuts.
✔ Bitcoin becomes more attractive than bonds
✔ Liquidity shifts toward risk assets
✔ Institutional inflows rise
✔ Altcoins outperform once BTC stabilizes
A sustained rate-cut cycle could push Bitcoin back above $100k, and Ethereum near $3,800–4,000 in the coming weeks.
5. What Does the Dot Plot Say About 2026?
The 2026 dot plot reveals:
✔ A divided Fed
✔ Uncertainty about how fast rates can fall
✔ A risk that cuts may slow if inflation rises again
This means:
Rate cuts are not guaranteed every meeting
Volatility will remain high
Markets will react sharply to every data print
Also Check on YouTube for Macro Breakdown:
Conclusion: A Turning Point for Global Markets
The US Fed’s 25 bps rate cut marks the beginning of a major global shift.
Liquidity will slowly return
Equity & crypto markets get stronger
Emerging markets like India attract more capital
Borrowing becomes easier
Growth sectors outperform
This is not just a rate cut it is the start of a new monetary cycle that could shape markets through 2026.
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FAQ
1. Why did the Fed cut rates?
Cooling inflation, softening labor data, and financial pressures.
2. Will the Fed cut rates again soon?
Depends on future inflation and employment data the dot plot suggests division.
3. How does this affect India?
Very positively: more FII inflows, stronger equities, better growth outlook.
4. What does this mean for crypto?
Extremely bullish crypto thrives when liquidity expands.
5. Will EMIs fall in the US?
Yes, borrowing costs will gradually decline.
Citations
US Federal Reserve FOMC statement
Inflation & labour data reports
Market reaction from global financial outlets
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