The US Federal Reserve has cut the federal funds rate by 50 bps to 4.75-5%, aiming for a soft landing amid economic uncertainties
Fed has projected another 50-bp cut this year, but warned against interpreting this as a sign of continuous rate reduction
Unlike typical easing cycles, lower rates now risk increased spending, potentially causing inflation to stick above the target
The neutral rate, previously around 2.5%, is now estimated between 3.5% and 4.8%, limiting the scope for significant rate cuts
Fed's actions influence global financial markets. This cycle differs as rates are expected to stay well above near-zero levels
With the Fed easing, RBI must manage capital flows to avoid rupee appreciation, while staying focused on its 4% inflation target