The U.S. federal is the most significant central bank in the world as its interest rate decides the economic outlook of the U.S. and other nations, especially emerging markets. On 30 January 2025 U.S. Federal Reserve has decided no change in interest rates despite the vision of Trump expansionary policy in America. The Fed chairman said that the economy is still strong and in a better situation so there is no need to change interest rates for a while which means things like loan interest rates, saving rates and mortgage costs will remain the same for some time.

The rates of the Fed directly impact the interest rates of other countries central banks as the dollar is mainly accepted for exchange between countries' trades. If the rates of the Fed will lower in the future it will make America a suitable place for business because banks are getting loans from the Fed at lower rates which will further deliver banks to businesses in the U.S. which encourage growth in markets U.S. and investors are able to get more return on their investments. These affect emerging markets economies and strengthen the dollar position globally. If interest rates increase by the Fed then it will create opportunities for other economies as it adversely affects the revenue and business opportunities of companies in America which turns the flow of investors to emerging markets which may generate better returns for them. As of now trump's policy of imposing tariffs and cuts in tax rates of companies might create inflation in the U.S. and could encourage the Fed to increase interest rates. The Fed is not in the mood to drop interest rates but Trump's policy in the future might create a contradiction between Trump and the Fed as Trump said that “Fed has failed to control the inflation in U.S. after pandemic”.

The Fed wants to control inflation rates as they have a target of 2% for inflation and they closely assessing Trump's policy according to it Fed will manage rates in the future. If inflation rises too much from the present situation this will definitely encourage the Fed to lower their interest rate for economic control. The current unemployment data is 4.1% which is significantly low and falls from the previous 4.2% rate and strong labor market conditions push the Fed to remain unchanged in the interest rates. On the current economic outlook, Fed chief Jerome Powell said “We are not in a hurry to change interest rates” and he further added that current economic numbers are strong and under control. Fed doesn’t change its rates until inflation increases too fast or the job market is weak in America. Currently, they are waiting for a clear sign of change in interest rates, if companies start layoffs of people or job growth slowdown there is a chance that the Fed might lower interest rates but as of now they are waiting for a clear sign.

The Fed rate change affects the rate of RBI in the context of India, if the interest rate increases by the Fed it creates pressure on RBI to increase its rates because it makes bond markets less attractive in comparison to the U.S. economy. India is riskier from an investment perspective and if interest rates are increased by the U.S. it is obligatory for India to increase their rates in comparison to the U.S. to maintain the relevancy of its markets because investors always want to maintain their capital safe and better return on it, if U.S. increase interest rate investor prefer more U.S. market rather than risky markets like India. The current unchanged rates of the Fed will keep saving, loan interest, inflation, and unemployment the same but future expectations of trump policy could create a higher chance for change in the interest rates of the Fed. In the speech Fed Chief Powell, stated that we focusing on lowering the inflation rate to 2% and we will not change rates until we get clear signs in the economy & keep the rate unchanged (4.25-4.50%).