The Fed's rate outlook has rattled markets. Here's what it means for global central banks

Group 1: U.S. Federal Reserve Actions - The U.S. Federal Reserve raised its inflation outlook and signaled fewer rate cuts in 2025, indicating only two cuts compared to previous expectations [2][3] - Fed Chair Jerome Powell noted that inflation has been moving sideways this year, contributing to a more cautious approach towards rate cuts [2] Group 2: Impact on Global Markets - A stronger U.S. dollar is anticipated due to the Fed's hawkish stance, leading to tighter global financial conditions, particularly affecting emerging markets [3][4] - Asian currencies reacted negatively, with the Japanese yen falling 0.74% to 155.94 against the dollar, and the Indian rupee hitting a record low below 85 [5] Group 3: Central Bank Responses in Asia - The Bank of Japan maintained its benchmark interest rate at 0.25%, with a split decision among board members regarding potential hikes [7] - The People's Bank of China is shifting its policy stance to "moderately loose" after 14 years, although the Fed's outlook may not heavily influence its decisions [10][11] Group 4: Central Bank Strategies in India and South Korea - The Reserve Bank of India kept its policy repo rate unchanged at 6.50%, with expectations of a 25-basis-point cut in February amid a slowing economy [13] - The Bank of Korea cut its benchmark interest rate by 25 basis points, marking its first back-to-back cuts since 2009, as it aims to support economic growth [15][16] Group 5: European Central Bank and Other European Responses - The European Central Bank announced its fourth rate cut of the year, lowering its inflation forecast, with expectations for further cuts next year [20][22] - The Swiss National Bank recently reduced its main rate to 0.5%, with potential implications from a stronger dollar affecting its policy stance [23][24] Group 6: Overall Economic Outlook - Analysts suggest that the Fed's cautious approach may lead to weaker growth in the euro zone, impacting the European Central Bank's decisions [21][22] - The potential for higher imported inflation due to a stronger dollar could limit the scope for rate cuts across various central banks [27][28]