Rupee sinks to record low of 85.07 against dollar after US Fed signals fewer rate cuts in 2025

The rupee crossed the 85-mark to close its trading at a record low of 85.07 against the dollar. The Sensex was down 965 points as the world stock market was rattled by the hawkish comments from the US Federal Reserve that signalled fewer interest rate cuts in 2025.

On Wednesday evening, the Federal Reserve in the United States reduced its benchmark rate by 25 basis points, whereas the Bank of England and the Bank of Japan maintained their rates unchanged on Thursday.

It was the fourth day of the benchmark Sensex's continuous slump that saw investors crying red. The 30-share gauge collapsed by 964.15 points or 1.20 percent, to settle at 79218.05.

In intra-day trading, it actually hit even below 79020.08 points, which is lower than the previous closing value at the index which went down by 1162.12 points. On the other side, the wider Nifty dropped 247.15 points or 1.02 percent at 23951.70 to plummet under the 24000-mark on the NSE.

The shocker to equities and the rupee followed after Jerome Powell, chairman of the Fed, indicated that there would only be two cuts in interest rates in the next calendar year."

Prior to the decision by the US central bank, it was actually predicted to lower the borrowing costs thrice or four times during the period of 2025.

"Further cuts would depend on progress on inflation. For the time being, we are moving sideways on 12-month inflation," he told reporters during a news conference.

His remarks caused a blow-up worldwide, with major indexes in Europe trading lower by 1.26 percent at the time this report was being compiled. South Korea's Kospi recorded the most severe drop among other markets, going down by 1.95%.

Japan held interest rates for its central bank but Bank of Japan Governor Kazuo Ueda said it will continue to increase interest rates if the economy performs as the forecast predicts. Such comments and such movement led the Nikkei to fall by 0.69 percent.

In fact, the Bank of England on Thursday left interest rates unchanged, warning of "heightened uncertainty" because inflation continued moving further above targets.

Market circles noticed that domestic stocks were coming under pressure as FIIs continued the sell-off even amid worries that slower Fed policy in 2025 would dent discretionary spending and hurt IT firms.

According to the government, the growth of the American economy at a healthy pace of 3.1 percent annually, from July to September, was due to an increase in exports and vigorous consumer spending, as stated in an upgrade of an earlier estimate.